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Job Matching and the Returns to Educational Signals

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Author Info
Habermalz, Steffen () (Marquette University and IZA Bonn)

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Abstract

This paper develops a multi-period model, in which workers are matched with jobs according to imperfect educational signals and in which their subsequent productivities depend on both their inherent ability and on the quality of the job match. It outlines a sequential process, in which underpaid employees reveal their true productivities and overpaid employees are detected by the firm until every match is perfect. The model produces a time path of the returns to educational signals that is concave, a feature that earlier studies used to dismiss educational signaling. Using a synthetic panel data set from the Current Population Survey the theoretical result is then substantiated empirically. The paper contributes to the literature by establishing the possibility of increasing returns to education over part of a workers life within the signaling framework theoretically and empirically.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 726.

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Length: 30 pages
Date of creation: Feb 2003
Date of revision:
Handle: RePEc:iza:izadps:dp726

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Related research
Keywords: returns to education signaling job matching information

Find related papers by JEL classification:
I20 - Health, Education, and Welfare - - Education - - - General
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ann P. Bartel & George J. Borjas, 1982. "Wage Growth and Job Turnover: An Empirical Analysis," NBER Working Papers 0285, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Jaeger, David A & Page, Marianne E, 1996. "Degrees Matter: New Evidence on Sheepskin Effects in the Returns to Education," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 733-40, November. [Downloadable!] (restricted)
  3. Stephen V. Cameron & James J. Heckman, 1991. "The Nonequivalence of High School Equivalents," NBER Working Papers 3804, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Farber, Henry S & Gibbons, Robert, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1007-47, November. [Downloadable!] (restricted)
  5. Riley, John G, 2002. " Weak and Strong Signals," Scandinavian Journal of Economics, Blackwell Publishing, vol. 104(2), pages 213-36, June. [Downloadable!] (restricted)
  6. Belman, Dale & Heywood, John S, 1997. "Sheepskin Effects by Cohort: Implications of Job Matching in a Signaling Model," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 623-37, October. [Downloadable!] (restricted)
  7. Kelly Bedard, 2001. "Human Capital versus Signaling Models: University Access and High School Dropouts," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 749-775, August. [Downloadable!] (restricted)
  8. Arrow, Kenneth J., 1973. "Higher education as a filter," Journal of Public Economics, Elsevier, vol. 2(3), pages 193-216, July. [Downloadable!] (restricted)
  9. Layard, Richard & Psacharopoulos, George, 1974. "The Screening Hypothesis and the Returns to Education," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 985-98, Sept./Oct. [Downloadable!] (restricted)
  10. Belman, Dale & Heywood, John S, 1991. "Sheepskin Effects in the Returns to Education: An Examination on Women and Minorities," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 720-24, November. [Downloadable!] (restricted)
  11. Hungerford, Thomas & Solon, Gary, 1987. "Sheepskin Effects in the Returns to Education," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 175-77, February. [Downloadable!] (restricted)
  12. Riley, John G, 1979. "Testing the Educational Screening Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S227-52, October. [Downloadable!] (restricted)
  13. Joseph E. Stiglitz, 2002. "Information and the Change in the Paradigm in Economics," American Economic Review, American Economic Association, vol. 92(3), pages 460-501, June. [Downloadable!] (restricted)
  14. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August. [Downloadable!] (restricted)
  15. Michael Spence, 2002. "Signaling in Retrospect and the Informational Structure of Markets," American Economic Review, American Economic Association, vol. 92(3), pages 434-459, June. [Downloadable!] (restricted)
  16. Heywood, John S., 1994. "How widespread are sheepskin returns to education in the U.S.?," Economics of Education Review, Elsevier, vol. 13(3), pages 227-234, September. [Downloadable!] (restricted)
  17. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August. [Downloadable!] (restricted)
  18. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning And Statistical Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 313-350, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Robert Gibbons & Michael Waldman, 2003. "Enriching a Theory of Wage and Promotion Dynamics Inside Firms," NBER Working Papers 9849, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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