Education and Wage-Based Statistical Discrimination

This study examines the role of statistical discrimination in determining workers’ wages. Employers initially have an imperfect knowledge of their employees’ true productivity and so may “statistically discriminate” in setting wages, using observed correlates of productivity to estimate its true value. For both holders of bachelors’ degrees and MBA graduates, I use the traditional EL-SD test to investigate the existence and importance of various potential bases of discrimination, including university prestige, undergraduate GPA, undergraduate major, gender, and presence of an MBA. I find evidence of discrimination on the basis of undergraduate GPA, especially among women, but little evidence of discrimination on other bases.