Statistical Discrimination and the Early Career Evolution of the Black- White Wage Gap

Abstract

This article develops and tests a simple dynamic model of statistical discrimination. The model improves on earlier static models both by allowing ex ante uncertainty about worker productivity to be resolved as on-the-job performance is observed and by generating several testable empirical implications. These predictions are tested using a sample of young men from the National Longitudinal Survey of Youth, producing mixed evidence for the model. The main empirical result is that no black-white wage gap exists at labor force entry but that one develops as experience accumulates, mainly because blacks reap smaller gains from job mobility.

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