Abstract
We develop a model with which to explore discrimination and prejudice within labor markets. Our approach emphasizes the role of an individual's own experience in the assessment of efforts of other individuals. Specifically, we consider a two stage process in which individuals first learn, through experience, whether effort is rewarded and then subsequently have to estimate the effort of others. Our theoretical results suggest that those who are not rewarded for high effort will underestimate the effort of other individuals while those for whom effort is rewarded will (slightly) overestimate the effort of others. We empirically test and confirm this prediction.
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