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Education Signalling with Preemptive Offers

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  • Swinkels, Jeroen M

Abstract

We analyse a version of Spence's job market signalling model in which firms can make job offers before workers complete their education. Workers cannot commit to turning down such offers. Offers are private, so that workers are unable to use one firm's offer in an attempt to elicit better offers from other firms. In the unique sequential equilibrium outcome of the model with unproductive education, there is no wasteful education. When education is productive, the standard model predicts that more able individuals become overeducated to separate themselves from less able workers. In our model, less able workers become overeducated to (partially) pool with more able workers. The pooling mutes the incentives of high ability workers, who in consequence actually choose to become undereducated. We examine the robustness of our result to modifications to the basic model. Copyright 1999 by The Review of Economic Studies Limited.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 66 (1999)
Issue (Month): 4 (October)
Pages: 949-70

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Handle: RePEc:bla:restud:v:66:y:1999:i:4:p:949-70

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Cited by:
  1. Francesc Dilme & Fei Li, 2013. "Dynamic Education Signaling with Dropout Risk, Third Version," PIER Working Paper Archive 14-014, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 24 Apr 2014.
  2. Byoung Heon Jun & In-Uck Park, 2005. "Anti-Limit Pricing," Levine's Bibliography 172782000000000041, UCLA Department of Economics.
  3. Kremer, Ilan & Skrzypacz, Andrzej, 2007. "Dynamic signaling and market breakdown," Journal of Economic Theory, Elsevier, vol. 133(1), pages 58-82, March.
  4. Francesc Dilmé, 2014. "Dynamic Quality Signaling with Hidden Actions," PIER Working Paper Archive 14-019, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  5. Andrzej Skrzypacz, 2004. "Ratings, certifications and grades: dynamic signaling and market breakdown," Theory workshop papers 121473000000000010, UCLA Department of Economics.
  6. Ayça Kaya, 2005. "Repeated Signaling Games," CIE Discussion Papers 2005-07, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  7. Francesc Dilmé, 2012. "Dynamic Quality Signaling with Hidden Actions, Second Version," PIER Working Paper Archive 13-063, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 03 Oct 2013.
  8. Dong, Baomin & Fu, Shihe & Gong, Jiong & Fan, Hanwen, 2014. "The Lame Drain," MPRA Paper 53825, University Library of Munich, Germany.
  9. Khanna, Naveen & Mathews, Richmond D., 2012. "Doing battle with short sellers: The conflicted role of blockholders in bear raids," Journal of Financial Economics, Elsevier, vol. 106(2), pages 229-246.
  10. Francesc Dilme & Fei Li:, 2012. "Dynamic Education Signaling with Dropout, Second Version," PIER Working Paper Archive 13-048, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 03 Sep 2013.
  11. William Greene, 2007. "Functional Form and Heterogeneity in Models for Count Data," Working Papers 07-10, New York University, Leonard N. Stern School of Business, Department of Economics.
  12. Kaya, Ayça & Liu, Qingmin, 0. "Transparency and price formation," Theoretical Economics, Econometric Society.
  13. Muysken,Joan & Weel,Bas,ter, 1999. "Overeducation, Job Competition and Unemployment," Research Memorandum 030, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  14. Orzach, Ram & Tauman, Yair, 2005. "Strategic dropouts," Games and Economic Behavior, Elsevier, vol. 50(1), pages 79-88, January.
  15. Luís Cabral, 2012. "Lock in and switch: Asymmetric information and new product diffusion," Quantitative Marketing and Economics, Springer, vol. 10(3), pages 375-392, September.

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