LABOR MARKET INFORMATION: Empirical Methods 3

An additional important component of the empirical analysis, which is described following the discussion of the results testing for taste versus statistical discrimination, concerns whether the differences between aoLS and aIV indicated by the data stem from imperfect information, or simply from measurement error in the performance rating available in the data set as a measure of true, known productivity. This is potentially important because the latter type of measurement error could generate evidence of statistical discrimination, despite employers (but not econometricians) having perfect information about workers. Electronic Payday Loans Online

Is Labor Market Information Better for Some Demographic Groups?

An additional issue relating to labor market information and race and sex differences in wages is whether employers have better information about white workers than about minority or female workers, possibly because of word-of-mouth references, better communication (Lang, 1986), or more difficulty in discerning true signals.10 The tests described above may not indicate that imperfect information gives rise to statistical discrimination, which in turn leads to evidence looking like taste discrimination, if expected productivity is the same across groups. Nonetheless, information problems that are more severe for minority or female workers could help to explain their lower wages. For example, in the Rothschild-Stiglitz model of statistical discrimination, less accurate information about minorities can lead to group discrimination—i.e., an average wage gap that is larger than the average productivity gap (which could equal zero).