Abstract
We study statistical discrimination based on the school which an individual attended. Employers face uncertainty regarding an individual's productive value. Knowing which school an individual went to is useful for two reasons: firstly, average student ability may differ across schools; secondly, different schools may provide different incentives to exert effort. We examine the optimal way of grouping students in the face of school-based statistical discrimination. We argue that an optimal school system exhibits coarse stratification with respect to ability, and more lenient grading at the top-tier schools than at the bottom-tier schools. Our paper contributes to the ongoing policy debate on school tracking.
[The paper is joint with Adrien Vigier]
Invited by: Stefano Bolatto
Local Organizer: Giovanni Angelini