Fraternities and labor market outcomes

Sergey Popov and Dan Bernhardt

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Signaling; fraternities; statistical discrimination (search for similar items in EconPapers)
JEL-codes: D82 H4 J31 (search for similar items in EconPapers)
Date: 2009-10-07
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://mpra.ub.uni-muenchen.de/18853/1/MPRA_paper_18853.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/26522/1/MPRA_paper_26522.pdf revised version (application/pdf)

Related works:
Journal Article: Fraternities and Labor-Market Outcomes (2012)
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