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Employer Learning and Schooling-Related Statistical Discrimination in Britain

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  • Galindo-Rueda, Fernando

    (London School of Economics)

Abstract

This paper develops and tests a new model of asymmetric information in the labour market involving employer learning. In the model, I provide theoretical conditions for the identification -- based on the experience and tenure profiles of estimated returns to ability and education -- of employer learning about unobserved worker's productivity and statistical discrimination based on years of schooling. Using data from two British birth cohorts, estimates based on this model support the hypothesis that British employers have limited information about their workers, make inferences based on their education levels, and progressively learn about their true ability. Moreover, this learning process -- particularly among blue-collar workers-- favours incumbent employers relative to potential competitors (asymmetric learning). This informational advantage implies an additional distortion in the functioning of the labour market and policy evaluation rarely takes into account the informational impact of interventions and its implications for individual behaviour.

Suggested Citation

  • Galindo-Rueda, Fernando, 2003. "Employer Learning and Schooling-Related Statistical Discrimination in Britain," Royal Economic Society Annual Conference 2003 82, Royal Economic Society.
  • Handle: RePEc:ecj:ac2003:82
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    References listed on IDEAS

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    Cited by:

    1. Barbara Mueller & Stefan C. Wolter, 2011. "The Consequences of Being Different - Statistical Discrimination and the School-to-Work Transition," CESifo Working Paper Series 3345, CESifo.
    2. Nakabayashi, Masaki, 2011. "Schooling, employer learning, and internal labor market effect: Wage dynamics and human capital investment in the Japanese steel industry, 1930-1960s," MPRA Paper 30597, University Library of Munich, Germany.
    3. Gill Wyness & Lindsey Macmillan & Jake Anders, 2021. "Does education raise people's productivity or does it just signal their existing ability?," CEPEO Briefing Note Series 12, Centre for Education Policy and Equalising Opportunities, UCL Institute of Education, revised Apr 2021.
    4. Wang, Jun & Li, Bo, 2020. "Does employer learning with statistical discrimination exist in China? Evidence from Chinese Micro Survey Data," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 319-333.
    5. Barbara Mueller & Stefan Wolter, 2014. "The role of hard-to-obtain information on ability for the school-to-work transition," Empirical Economics, Springer, vol. 46(4), pages 1447-1471, June.
    6. NAKABAYASHI, Masaki, 2011. "Acquired Skills and Learned Abilities: Wage Dynamics of Blue-collar Workers in Internal Labor Markets," ISS Discussion Paper Series (series F) f153, Institute of Social Science, The University of Tokyo, revised Apr 2012.
    7. Peter Arcidiacono & Patrick Bayer & Aurel Hizmo, 2010. "Beyond Signaling and Human Capital: Education and the Revelation of Ability," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 76-104, October.
    8. Núria Rodríquez-Planas, 2011. "Displacement, Signaling, and Recall Expectations," Working Papers 550, Barcelona Graduate School of Economics.
    9. Theodore Koutmeridis, 2013. "The Market for "Rough Diamonds": Information, Finance and Wage Inequality," CDMA Working Paper Series 201307, Centre for Dynamic Macroeconomic Analysis, revised 14 Oct 2013.
    10. Koerselman, Kristian, 2011. "Bias from the use of mean-based methods on test scores," Working Paper Series 1/2011, Stockholm University, Swedish Institute for Social Research.
    11. Yuki, Kazuhiro, 2009. "Education, Signaling, and Wage Inequality in a Dynamic Economy," MPRA Paper 16982, University Library of Munich, Germany.
    12. Fabian Lange, 2005. "The Returns to Schooling and Ability During the Early Career: Evidence on Employer Learning and Post-School Investment," 2005 Meeting Papers 253, Society for Economic Dynamics.

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    More about this item

    Keywords

    employer learning; statistical discrimination; asymmetric information; unobserved ability;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J39 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Other
    • J79 - Labor and Demographic Economics - - Labor Discrimination - - - Other

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