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Education Signaling with Preemptive Offers

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  • Jeroen M. Swinkels

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

Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1175.

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Date of creation: Jan 1997
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Handle: RePEc:nwu:cmsems:1175

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Cited by:
  1. Orzach, Ram & Tauman, Yair, 2005. "Strategic dropouts," Games and Economic Behavior, Elsevier, vol. 50(1), pages 79-88, January.
  2. 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.
  3. 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.
  4. 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.
  5. Kaya, Ayça & Liu, Qingmin, 0. "Transparency and price formation," Theoretical Economics, Econometric Society.
  6. Byoung Heon Jun & In-Uck Park, 2005. "Anti-Limit Pricing," Levine's Bibliography 172782000000000041, UCLA Department of Economics.
  7. Kremer, Ilan & Skrzypacz, Andrzej, 2007. "Dynamic signaling and market breakdown," Journal of Economic Theory, Elsevier, vol. 133(1), pages 58-82, March.
  8. 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.
  9. Dong, Baomin & Fu, Shihe & Gong, Jiong & Fan, Hanwen, 2014. "The Lame Drain," MPRA Paper 53825, University Library of Munich, Germany.
  10. 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.
  11. 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).
  12. Ayça Kaya, 2005. "Repeated Signaling Games," CIE Discussion Papers 2005-07, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  13. Skrzypacz, Andrzej & Kremer, Ilan, 2005. "Ratings, Certifications and Grades: Dynamic Signaling and Market Breakdown," Research Papers 1814r2, Stanford University, Graduate School of Business.
  14. 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.
  15. 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.

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