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In our model of statistical discrimination, employers observe worker's y with y = + . Recall that y is a metric of everything the employer

In our model of statistical discrimination, employers observe worker's y with y = + . Recall that y is a metric of everything the employer knows about the worker, is true productivity, and is the mean of taken across all workers. As in class, assume the error is normally distributed with mean 0. Suppose that in addition to knowing and observing y, employers also observed . What would they pay the worker?

y

(1 - ) + y

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