Abstract
This paper develops a statistical discrimination model concerning the second order moment. It is shown that with heterogeneous individuals within a group, this form of statistical discrimination has differential impact on individuals. Specifically a belief that one group has a smaller variability may be self-fulfilling and persist without policy intervention, so two groups are identical ex ante but different ex post. The history-dependent belief offers an explanation why there may be smaller variability in observed qualifications among female, even though its underlying distribution of innate ability may be the same as male.
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