Repeated Selection with Heterogenous Individuals and Relative Age Effects

40 Pages Posted: 19 Apr 2012

See all articles by Herbert Dawid

Herbert Dawid

Bielefeld University - Department of Business Administration and Economics; Center for Mathematical Economics

Gerd Muehlheusser

University of Hamburg; IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: April 19, 2012

Abstract

In contexts such as education and sports, skill-accumulation of individuals over time crucially depends on the amount of training they receive, which is often allocated on the basis of repeated selection. We analyze optimal selection policies in a model of endogenous skill formation where, apart from their ability to transform training into skills, individuals also differ with respect to relative age. The latter has been identified by recent empirical research as a major determinant for performance differentials within cohorts. We find that the optimal policy is pro-competitive at later selection stages in the sense of selecting the individuals with the higher skill signals. All eventual corrections due to relative age occur at early stages, where selection is either counter-competitive (i.e. individuals with low skill signals are selected) or even avoided at all. Thereby, the induced selection quality is non-monotone in the degree of ex-ante asymmetry due to relative age. Finally, the (empirical) observation of persistent relative age effects does in general not hint at suboptimal selection policies.

Keywords: skill formation, human capital, selection, heterogeneity, age effects, training, education

JEL Classification: J240, M530, I250, I280

Suggested Citation

Dawid, Herbert and Muehlheusser, Gerd, Repeated Selection with Heterogenous Individuals and Relative Age Effects (April 19, 2012). CESifo Working Paper Series No. 3786. Available at SSRN: https://ssrn.com/abstract=2042459

Herbert Dawid

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany
+49-521-1064843 (Phone)
+49-521-1062994 (Fax)

Center for Mathematical Economics ( email )

Postfach 10 01 31
Bielefeld, D-33501
Germany

Gerd Muehlheusser (Contact Author)

University of Hamburg ( email )

Von Melle Park 5
Hamburg, 20146
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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