Employer learning, statistical discrimination and university prestige

Available from: 
October 2013
Paper author(s): 
Paola Bordon (University of Wisconsin-Madison)
Breno Braga (University of Michigan)
Topic: 
Labor
Year: 
2013


This paper investigates whether rms use university prestige to statistically discriminate among college graduates. The test is based on the employer learning literature which suggests that if rms use a characteristic for statistical discrimination, this variable should become less important for earnings determination as a worker gains labor market experience. In this framework, we use a regression discontinuity design to estimate a 19% wage premium for recent graduates of two of the most selective universities in Chile. However, we find that this premium decreases by 3 percentage points per year of experience for individuals around the admissions cuto. This result suggests that rms pay workers in accordance with the selectivity of their college when they graduate from school, but reward them based on their true productivity as they reveal their quality to employers.

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Research section: 
Lacea 2013 annual meeting
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