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Human Capital Versus Signaling Models: University Access and High School Drop-outs

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  • Kelly Bedard

    (UC - Santa Barbara)

Abstract

Under the educational sorting hypothesis, an environment in which some individuals are constrained from entering university will be characterized by increased pooling at the high school graduation level, as compared to an environment with greater university access.This results because some potential high school drop-outs and university enrollees choose the high school graduate designation in order to take advantage of high ability individuals who are constrained from entering university.This is in stark contrast to human capital theory which predicts higher university enrollment, but identical high school drop-out rates in regions with greater university access. I test the contradictory high school drop-out predictions of the human capital and signaling models using NLSYM and NLSYW education data from the late 1960s and early 1970s. I find that labor markets that contain universities have higher high school drop-out rates. This result is consistent with a signaling model, and inconsistent with a pure human capital model.

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Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 1999-01.

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Handle: RePEc:clm:clmeco:1999-01

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Keywords: education; human capital; sorting models;

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  1. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  2. Lang, Kevin & Kropp, David, 1986. "Human Capital versus Sorting: The Effects of Compulsory Attendance Laws," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 609-24, August.
  3. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," NBER Working Papers 4483, National Bureau of Economic Research, Inc.
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