A Comparison of the Human Capital and Signaling Models: The Case of the Self-Employed and the Increase in the Schooling Premium in the 1980's
AbstractThis paper utilizes the self-employed to analyze the observed increase in the educational earnings premium in the 1980’s. The paper compares the predictions of the signaling and human capital models in response to an exogenous demand shock such as a skill-biased technological change. Since the self-employed have no incentive to invest in a costly signal to show to employers their productivity, a change in the schooling equilibrium should not affect their earnings. Four testable hypotheses are derived. The findings suggest that the signaling model may indeed predict the observed changes in the schooling premium that are not consistent with the predictions of the human capital model.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 160.
Length: 40 pages
Date of creation: Jun 2000
Date of revision:
Publication status: published in: Research in Labor Economics, 2001, 20, 191-215
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Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Find related papers by JEL classification:
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
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