The Speed of Employer Learning
The employer-learning literature finds support for statistical discrimination on the basis of schooling. How economically relevant statistical discrimination is depends on how fast employers learn about workersâ€™ productive types. This article is the first to estimate the speed of employer learning. Employers learn quickly. Initial expectation errors decline by 50% within 3 years. This estimate places an upper bound on the contribution of signaling. This bound varies with the speed of employer learning and with discount rate. For a wide range of parameter values, the contribution of signaling to the gains from schooling is less than 25%.
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