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Grades and Employer Learning

Author

Listed:
  • Hansen, Anne Toft

    (VIVE - The Danish Centre for Applied Social Science)

  • Hvidman, Ulrik

    (Aarhus University)

  • Sievertsen, Hans Henrik

    (University of Bristol)

Abstract

This study examines the labor-market returns of skill signals. We identify the labor-market effect of grade point averages (GPA) by leveraging a nationwide change in the scaling of grades in Danish universities. Results show that a reform-induced increase in GPA that is unrelated to ability causes higher earnings immediately after graduation, but the effect fades in subsequent years. The effect at labor-market entry is largest for individuals with fewer alternative signals and the earnings adjustment occurs both within and across firms. Although employers initially screen candidates based on skill signals, our findings suggest that they rapidly learn about worker productivity.

Suggested Citation

  • Hansen, Anne Toft & Hvidman, Ulrik & Sievertsen, Hans Henrik, 2021. "Grades and Employer Learning," IZA Discussion Papers 14200, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14200
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    Keywords

    employer learning; job-market signaling; higher education;
    All these keywords.

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education

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