Statistical discrimination a) Define the concept of statistical discrimination. Why is statistical discrimination likely to persist in long-run equilibrium? In an economy, there are two types of workers, B and W. Workers' productivity is denoted by 0. The distribution of @, conditional on type, is normal with mean ; and variance of, forj = B, W. Actual productivity is not observed. Employers can only observe the worker's type (B or W), and the result of a test score, y, which is an imperfect predictor of productivity. Specifically, the test score y is distributed normal with mean 0 and variance or forj = B, IV. Assume that firms have initially the same priors about B and W workers, i.e., As = Aw, and Jes = Jew. However, Tys > Tyw this means that the test score for B type workers is a less precise measure of productivity than the test for W type workers. b) Assume that firms offer a constant wage w; but they but they hire workers only if their expected productivity (conditional on the signal y) is greater than some threshold value 0. Show that a firm will hire a worker only if the signal y exceeds some threshold y. What is y? c) Show that y is increasing in of if 0 > , and that y is decreasing in of if 0