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Employer Learning and Statistical Discrimination

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  • Joseph G. Altonji
  • Charles R. Pierret

Abstract

We show that if firms statistically discriminate among young workers on the basis of easily observable characteristics such as education, then as firms learn about productivity, the coefficients on the easily observed variables should fall, and the coefficients on hard-to-observe correlates of productivity should rise. We find support for this proposition using NLSY79 data on education, the AFQT test, father's education, and wages for young men and their siblings. We find little evidence for statistical discrimination in wages on the basis of race. Our analysis has a wide range of applications in the labor market and elsewhere.

Suggested Citation

  • Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning and Statistical Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 313-350.
  • Handle: RePEc:oup:qjecon:v:116:y:2001:i:1:p:313-350.
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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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