Popov, Sergey V. and Bernhardt, Dan (2009): Fraternities and labor market outcomes.
This is the latest version of this item.
Download (575Kb) | Preview
We model how the choices by students to “rush” a fraternity, and the choices by a fraternity of whom to admit, interact with the signals that firms receive about student productivities to determine labor market outcomes. Both the fraternity and students care about future wages and fraternity socializing values. We first show that if the signals firms receive about students are either perfectly informative or perfectly noisy, then fraternity membership has no impact on labor market outcomes. For intermediate signaling technologies, however, three types of equilibria can exist: pessimistic beliefs by firms about the abilities of fraternity members can support an equilibrium in which no one pledges; optimistic beliefs can lead to higher wages for fraternity members than non-members, so that in equilibrium everyone whom the fraternity would like to admit actually pledges; and an equilibrium in which most fraternity members have intermediate abilities—less able students apply, hoping to be mixed in with better students, but are rejected unless they have high fraternity socializing values, while most very able students do not apply to avoid being tainted in labor market outcomes due to being mixed in with less able fraternity members. We provide sufficient conditions for this latter “hump-shaped” equilibrium to exist, take the model to the data and show that this equilibrium can reconcile the ability distribution of fraternity members at the University of Illinois. Finally, we estimate the welfare impact of the fraternity on different students.
|Item Type:||MPRA Paper|
|Original Title:||Fraternities and labor market outcomes|
|Keywords:||self-selection; screening; fraternities; statistical discrimination|
|Subjects:||H - Public Economics > H4 - Publicly Provided Goods
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information; Mechanism Design
|Depositing User:||Sergey Popov|
|Date Deposited:||08. Nov 2010 13:37|
|Last Modified:||11. Feb 2013 20:12|
Jack L. Anson and Robert F. Marchesani. Baird’s Manual of American College Fraternities. Menasha, Wisconsin: Banta Publishing Company, 1991. ISBN 0-9637159-0-9.
David Austen-Smith and Roland G. Fryer. An economic analysis of “acting white”. The Quarterly Journal of Economics, 120(2):551–583, 2005.
J.M. Buchanan. An economic theory of clubs. Economica, 32:1–14, 1965.
Stephen Coate and Glenn C. Loury. Will affirmative-action policies eliminate negative stereotypes? American Economic Review, 83(5):1220–1240, Dec 1993.
Hanming Fang. Social culture and economic performance. American Economic Review, 91 (4):924–937, 2001.
Hanming Fang and Peter Norman. Government-mandated discriminatory policies: Theory and evidence. International Economic Review, 47(2):361–389, 2006.
George J. Mailath, Larry Samuelson, and Avner Shaked. Endogenous inequality in integrated labor markets with two-sided search. American Economic Review, 90(1):46–72, Mar 2000.
Paul R. Milgrom. Good news and bad news: Representation theorems and applications. The Bell Journal of Economics, 12(2):380–391, Autumn 1981.
Andrea Moro and Peter Norman. A general equilibrium model of statistical discrimination. Journal of Economic Theory, 114(1):1–30, 2004.
Peter Norman. Statistical discrimination and efficiency. Review of Economic Studies, 70(3): 615–627, 2003.
Available Versions of this Item
Fraternities and labor market outcomes. (deposited 26. Nov 2009 01:57)
- Fraternities and labor market outcomes. (deposited 08. Nov 2010 13:37) [Currently Displayed]