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A Test of the Signalling Hypothesis - Evidence from Natural Experiment

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Author Info
Sebastian Stolorz (University of Oregon)

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Abstract

The paper proposes an alternative methodology for testing signalling hypothesis based on chances to get a job in a particular class of the job market. The individuals are ranked and matched by an external mechanism, based on preferences of employers in respect to actual observable and perceived unobservable attributes of individual. This paper tests existence of a relation between the set of observable and revealed attributes and the outcome of the game, specifically: whether signals associated with attained education plays a significant role in determining chances of the individual to get a job. The proposed model is empirically tested by applying a unique dataset from a natural experiment, conducted in Poland in years 2002-2005, where a relatively large set of job market candidates are offered a chance to get a paid internship at an attractive employer, with considerably great chances of getting a permanent job thereafter. Results support the hypothesis, that in the absence of revealed attributes, employers decisions depend upon signals on education. Whenever information is available, the significance of the signals diminishes.

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Publisher Info
Paper provided by EconWPA in its series Labor and Demography with number 0512008.

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Length: 39 pages
Date of creation: 15 Dec 2005
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Handle: RePEc:wpa:wuwpla:0512008

Note: Type of Document - pdf; pages: 39
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Web page: http://129.3.20.41

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Related research
Keywords: Human Capital; Signal;

Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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References listed on IDEAS
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  1. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March. [Downloadable!] (restricted)
  2. Garen, John, 1984. "The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable," Econometrica, Econometric Society, vol. 52(5), pages 1199-1218, September. [Downloadable!] (restricted)
  3. 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)
  4. Eng Loh, 1994. "Employment probation as a sorting mechanism," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 47(3), pages 471-486, April.
  5. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-29, April. [Downloadable!] (restricted)
  6. Weiss, Andrew, 1995. "Human Capital vs. Signalling Explanations of Wages," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 133-54, Fall. [Downloadable!] (restricted)
  7. Joseph Stiglitz & Andrew Weiss, 1990. "Sorting Out the Differences Between Signaling and Screening Models," NBER Technical Working Papers 0093, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. David Card, 1994. "Earnings, Schooling, and Ability Revisited," NBER Working Papers 4832, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Klein, Roger & Spady, Richard & Weiss, Andrew, 1991. "Factors Affecting the Output and Quit Propensities of Production Workers," Review of Economic Studies, Blackwell Publishing, vol. 58(5), pages 929-53, October. [Downloadable!] (restricted)
    Other versions:
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