Search results

Can differences in equilibrium beliefs among otherwise identical individuals account for a substantial degree of wage inequality? This paper shows that this is possible if two conditions are met. First, people learn about the distribution of wage offers from the experience of their peers, and second, people believe that wage offers are stationary even though offers that arrive later tend to have higher wages than offers that arrive earlier. Peer groups can then end up with different stable beliefs that lead to intergroup wage differences. The non‐stationarity of offers is rationalized in a model where firms can either advertise their job openings or not, and where advertised ones have more influence on more inexperienced job searchers. A statistic is proposed whose application to existing studies suggests that the non‐stationarity considered here is present in data.