Endogenous learning, persistent employer biases, and discrimination
Louis Pierre Lepage
No 34, CLEF Working Paper Series from Canadian Labour Economics Forum (CLEF), University of Waterloo
I present a new discrimination model of the labor market in which employers are initially uncertain about the productivity of worker groups and endogenously learn about it through their hiring. Previous hiring experiences of an employer shape their subsequent decisions to hire from a group again and learn more about its productivity, leading to differential learning across employers and biased beliefs about the group's productivity. Given a market-clearing wage, optimal hiring follows a cutoff rule in posterior beliefs: employers with sufficiently negative experiences with workers from a group stop hiring from the group, preserving negative biases and leading to a negativelyskewed distribution of beliefs about their productivity. When employers have noisier initial information on the productivity of one worker group, discrimination against that group can arise and persist without productivity differentials or prior employer biases, with market competition, and with or without worker signaling or investment decisions. The model generates steady state predictions analogous to the Becker (1957) tastebased model with beliefs replacing preferences, but is set within a statistical framework, explaining apparent prejudice as the result of \incorrect" statistical discrimination. The model also generates additional predictions and policy implications that contrast with previous models.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:clefwp:34
Access Statistics for this paper
More papers in CLEF Working Paper Series from Canadian Labour Economics Forum (CLEF), University of Waterloo
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().