Inequalities in decision-making at critical junctions in life: The role of ability signals for sorting and selection

Introduction

School track decisions, university or major choice, and initial job finding are all decisive for seizing life opportunities. When individuals from different socio-economic groups make different high-stakes decisions at these critical junctions, this can reinforce existing inequalities and lead to lock-in effects that are difficult to undo later in life. Understanding decision-making at these stages is thus fundamental to analyze and tackle inequality of opportunity.

Decision-Making Under Uncertainty

Individuals and evaluators make critical educational or occupational decisions under imperfect information due to uncertainties about true ability and future productivity. To resolve uncertainty, ability signals and their interpretation – both received and sent – are crucial components of decision-making, sorting, and selection.

Research Focus

OPPORTUNITY analyses the role of ability signals (such as grades, standardized tests, certificates, degrees, or CV information) for inequalities in high-stakes decision-making under uncertainty and inequality-reinforcing statistical and stereotypical discrimination by socio-economic background.

Methodology

To this end, it will draw on:

1. Experimental methods in lab and field to study the role of social environment and ability signals for unequal educational and occupational choices.
2. Administrative records to obtain information about absolute and relative ability signals (grades and degrees) awarded at various institutions over time.
3. Econometric techniques that help exploit exogenous variation to make causal inference about the role of SES and different ability signals for efficient sorting and selection.

Research Agenda

OPPORTUNITY will promote an innovative research agenda providing novel answers on how to mitigate the unfair and inefficient allocation of talent. It will inform about policies that provide resources or change ability signals to enhance equality of opportunity, one of the most urgent topics in Europe’s diverse, aging, and increasingly segregated societies.