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Employer learning, statistical discrimination and university prestige

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  • Bordón, Paola
  • Braga, Breno

Abstract

This paper investigates whether employers use university prestige as a signal of workers’ unobservable productivity. Our test is based on employer learning-statistical discrimination models, which suggest that if employers use university reputation to predict a worker’s unobservable quality, then college prestige should become less important for earnings as a worker gains labor market experience. In this framework, we use a regression discontinuity design to estimate a 13% wage premium for college graduates in their first year of the labor market who were barely accepted by one of the two most prestigious universities in Chile compared with those barely rejected by these two schools. However, we find that this premium decreases to 4% for workers with 6 or more years of labor market experience. This result suggests that college prestige becomes less important for employers as workers reveal their quality throughout their careers.

Suggested Citation

  • Bordón, Paola & Braga, Breno, 2020. "Employer learning, statistical discrimination and university prestige," Economics of Education Review, Elsevier, vol. 77(C).
  • Handle: RePEc:eee:ecoedu:v:77:y:2020:i:c:s0272775718301596
    DOI: 10.1016/j.econedurev.2020.101995
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    References listed on IDEAS

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    Cited by:

    1. Araki, Shota & Kawaguchi, Daiji & Onozuka, Yuki, 2016. "University prestige, performance evaluation, and promotion: Estimating the employer learning model using personnel datasets," Labour Economics, Elsevier, vol. 41(C), pages 135-148.
    2. Samia FERHAT, 2022. "The impact of university openings on labor market outcomes," THEMA Working Papers 2022-18, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    3. Busso, Matias & Montaño, Sebastián & Muñoz-Morales, Juan S., 2023. "Signaling Specific Skills and the Labor Market of College Graduates," IZA Discussion Papers 16449, Institute of Labor Economics (IZA).
    4. Naven, Matthew & Whalen, Daniel, 2022. "The signaling value of university rankings: Evidence from top 14 law schools," Economics of Education Review, Elsevier, vol. 89(C).
    5. Diether W. Beuermann & Nicolas L. Bottan & Bridget Hoffmann & C. Kirabo Jackson & Diego A. Vera Cossio, 2021. "Does Education Prevent Job Loss During Downturns? Evidence from Exogenous School Assignments and COVID-19 in Barbados," NBER Working Papers 29231, National Bureau of Economic Research, Inc.
    6. Milla, Joniada, 2017. "The Context-Bound University Selectivity Premium," IZA Discussion Papers 11025, Institute of Labor Economics (IZA).
    7. Dariel, Aurelie & Riedl, Arno & Siegenthaler, Simon, 2021. "Referral hiring and wage formation in a market with adverse selection," Games and Economic Behavior, Elsevier, vol. 130(C), pages 109-130.
    8. Lutter, Mark & Habicht, Isabel M. & Schröder, Martin, 2022. "Gender differences in the determinants of becoming a professor in Germany. An event history analysis of academic psychologists from 1980 to 2019," Research Policy, Elsevier, vol. 51(6).
    9. Busso, Matías & Montaño, Sebastián & Muñoz-Morales, Juan S., 2023. "Signaling Specific Skills and the Labor Market of College Graduates," IDB Publications (Working Papers) 12720, Inter-American Development Bank.
    10. Prakhov, Ilya, 2023. "Indicators of higher education quality and salaries of university graduates in Russia," International Journal of Educational Development, Elsevier, vol. 99(C).
    11. Élisabeth Tovar & Matthieu Bunel, 2021. "Attitudes on past-in-present educational discrimination. Insights from a representative factorial survey," EconomiX Working Papers 2021-28, University of Paris Nanterre, EconomiX.

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    More about this item

    Keywords

    Signaling; University Reputation; Regression Discontinuity;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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