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Grade Inflation, Social Background, and Labour Market Matching

  • Schwager, Robert
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    A model is presented where workers of differing abilities and from different social backgrounds are assigned to jobs based on grades received at school. It is examined how this matching is affected if good grades are granted to some low ability students. Such grade inflation is shown to reduce the aggregate wage of the lower class workers because employers use social origin as a signal for productivity if grades are less than fully informative. Moreover, the high-ability students from the higher class may benefit from grade inflation since this shields them from the competition on the part of able students from the lower classes.

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    File URL: https://econstor.eu/bitstream/10419/24766/1/dp08070.pdf
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    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 08-070.

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    Date of creation: 2008
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    Handle: RePEc:zbw:zewdip:7393
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    1. David Bjerk, 2008. "Glass Ceilings or Sticky Floors? Statistical Discrimination in a Dynamic Model of Hiring and Promotion," Economic Journal, Royal Economic Society, vol. 118(530), pages 961-982, 07.
    2. David H. Autor & David Scarborough, 2008. "Does Job Testing Harm Minority Workers? Evidence from Retail Establishments," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 219-277.
    3. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-40, December.
    4. Costrell, Robert M., 1997. "Can centralized educational standards raise welfare?," Journal of Public Economics, Elsevier, vol. 65(3), pages 271-293, September.
    5. Clark, Simon & Kanbur, Ravi, 2002. "Stable Partnerships, Matching, and Local Public Goods," Working Papers 127325, Cornell University, Department of Applied Economics and Management.
    6. Jo Blanden, 2004. "Family Income and Educational Attainment: A Review of Approaches and Evidence for Britain," Oxford Review of Economic Policy, Oxford University Press, vol. 20(2), pages 245-263, Summer.
    7. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
    8. Costrell, Robert M, 1994. "A Simple Model of Educational Standards," American Economic Review, American Economic Association, vol. 84(4), pages 956-71, September.
    9. Robert M. Costrell & Glenn C. Loury, 2004. "Distribution of Ability and Earnings in a Hierarchical Job Assignment Model," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1322-1363, December.
    10. Betts, Julian R, 1998. "The Impact of Educational Standards on the Level and Distribution of Earnings," American Economic Review, American Economic Association, vol. 88(1), pages 266-75, March.
    11. Ermisch, John & Francesconi, Marco, 2001. "Family Matters: Impacts of Family Background on Educational Attainments," Economica, London School of Economics and Political Science, vol. 68(270), pages 137-56, May.
    12. Hans Peter Gruner & Giacomo Corneo, 2000. "Social Limits to Redistribution," American Economic Review, American Economic Association, vol. 90(5), pages 1491-1507, December.
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