Statistical Discrimination and Intergenerational Mobility in a Matching Model

I develop a matching model with statistical discrimination and intergenerational mobility. Workers make both observable and unobservable investments before entering the market which aect their future productivity. Firms can search for workers based upon observable characteristics, be it observable investments, age, or some exogenous characteristic such as race. Multiple equilibria within each market can exist, one in which workers make unobservable investments and many rms search and one in which workers do not make unobservable investments and few rms search. Hence, two groups of workers that dier on an observable, exogenous characteristic (say, race) can be in two dierent equilibria. If parents ' investments decisions aect the investment decisions of their children, policies which remove the statistical discrimination by pooling the black and white labor markets will still lead to unequal results in the short run even if the groups are ex ante identical. Empirical predictions on the relationship between experience, education, and wages result