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Fraternities and labor market outcomes

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  • Popov, Sergey V.
  • Bernhardt, Dan

Abstract

We model how the choices by students to “rush” a fraternity, and the choices by a fraternity of whom to admit, interact with the signals that firms receive about student productivities to determine labor market outcomes. Both the fraternity and students care about future wages and fraternity socializing values. We first show that if the signals firms receive about students are either perfectly informative or perfectly noisy, then fraternity membership has no impact on labor market outcomes. For intermediate signaling technologies, however, three types of equilibria can exist: pessimistic beliefs by firms about the abilities of fraternity members can support an equilibrium in which no one pledges; optimistic beliefs can lead to higher wages for fraternity members than non-members, so that in equilibrium everyone whom the fraternity would like to admit actually pledges; and an equilibrium in which most fraternity members have intermediate abilities—less able students apply, hoping to be mixed in with better students, but are rejected unless they have high fraternity socializing values, while most very able students do not apply to avoid being tainted in labor market outcomes due to being mixed in with less able fraternity members. We provide sufficient conditions for this latter “hump-shaped” equilibrium to exist, take the model to the data and show that this equilibrium can reconcile the ability distribution of fraternity members at the University of Illinois. Finally, we estimate the welfare impact of the fraternity on different students.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18853.

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Date of creation: 07 Oct 2009
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Handle: RePEc:pra:mprapa:18853

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Keywords: Signaling; fraternities; statistical discrimination;

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References

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  1. Peter Norman, 2003. "Statistical Discrimination and Efficiency," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 615-627.
  2. Larry Samuelson & George J. Mailath & Avner Shaked, 2000. "Endogenous Inequality in Integrated Labor Markets with Two-Sided Search," American Economic Review, American Economic Association, vol. 90(1), pages 46-72, March.
  3. Hanming Fang, 2006. "Disentangling The College Wage Premium: Estimating A Model With Endogenous Education Choices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1151-1185, November.
  4. Coate, S. & Loury, G.C., 1992. "Will Affirmative Action Policies Eliminate Negative Stereotypes?," Papers 3, Boston University - Department of Economics.
  5. Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Hanming Fang & Peter Norman, 2006. "Government-Mandated Discriminatory Policies: Theory And Evidence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 361-389, 05.
  7. Moro, Andrea & Norman, Peter, 2004. "A general equilibrium model of statistical discrimination," Journal of Economic Theory, Elsevier, vol. 114(1), pages 1-30, January.
  8. Peter Norman, 2003. "Statistical Discrimination and Efficiency," Review of Economic Studies, Wiley Blackwell, vol. 70(3), pages 615-627, 07.
  9. Hanming Fang, 2001. "Social Culture and Economic Performance," American Economic Review, American Economic Association, vol. 91(4), pages 924-937, September.
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  1. College fraternities and the labor market
    by Economic Logician in Economic Logic on 2010-01-06 03:22:00

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