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Does the Human-Capital/Educational-Sorting Debate Matter for Development Policy?

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  • Lang, Kevin

Abstract

If education increases human capital, subsidizing education can generate economic growth and combat poverty. Estimates of its return suggest that education is a good social investment. In sorting models, the return reflects in part the information about productivity revealed by the worker's education. Thus the social and private returns diverge. It might appear that if we believe the sorting model, we should be less swayed by evidence that estimated returns to education exceed the social discount rate, and therefore less likely to support education-based development policies. This conclusion is shown to be incorrect.
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Suggested Citation

  • Lang, Kevin, 1994. "Does the Human-Capital/Educational-Sorting Debate Matter for Development Policy?," American Economic Review, American Economic Association, vol. 84(1), pages 353-358, March.
    • Handle: RePEc:aea:aecrev:v:84:y:1994:i:1:p:353-58
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    Cited by:

    1. Andrew Weiss, 1995. "Human Capital vs. Signalling Explanations of Wages," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 133-154, Fall.
    2. Borghans,L. & Grip,A.,de, 1999. "Skills and low pay: upgrading or overeducation?," ROA Research Memorandum 005, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    3. Brown, Sarah & Sessions, John G., 2006. "Evidence on the relationship between firm-based screening and the returns to education," Economics of Education Review, Elsevier, vol. 25(5), pages 498-509, October.
    4. Tomás Rau & Eugenio Rojas & Sergio Urzúa, 2013. "Loans for Higher Education: Does the Dream Come True?," NBER Working Papers 19138, National Bureau of Economic Research, Inc.
    5. John H. Tyler & Richard J. Murnane & John B. Willett, 1998. "Estimating the Impact of the GED on the Earnings of Young Dropouts Using a Series of Natural Experiments," NBER Working Papers 6391, National Bureau of Economic Research, Inc.
    6. Ireland, Norman & Naylor, Robin A. & Smith, Jeremy & Telhaj, Shqiponja, "undated". "Educational Returns, ability composition and cohort effects: theory and evidence for cohorts of early-career UK graduates," Economic Research Papers 271294, University of Warwick - Department of Economics.
    7. Hornig, Stephan O. & Rottmann, Horst & Wapler, Rüdiger, 2009. "Information asymmetry, education signals and the case of Ethnic and Native Germans," IAB-Discussion Paper 200914, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    8. Anupa Bir & Karen Eggleston, 2003. "Physician Dual Practice: Access Enhancement or Demand Inducement?," Discussion Papers Series, Department of Economics, Tufts University 0311, Department of Economics, Tufts University.
    9. Brown, Sarah & Sessions, John G., 1999. "Education and employment status: a test of the strong screening hypothesis in Italy," Economics of Education Review, Elsevier, vol. 18(4), pages 397-404, October.
    10. Eggleston, Karen & Bir, Anupa, 2006. "Physician dual practice," Health Policy, Elsevier, vol. 78(2-3), pages 157-166, October.
    11. Peter Arcidiacono & Patrick Bayer & Aurel Hizmo, 2010. "Beyond Signaling and Human Capital: Education and the Revelation of Ability," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 76-104, October.
    12. Barış Kaymak, 2025. "Quantifying the Signaling Role of Education," Working Papers 25-02, Federal Reserve Bank of Cleveland.
    13. Self, Sharmistha & Grabowski, Richard, 2006. "The Asian Financial Crisis: Impact on Human Development," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 2(2), pages 1-13.
    14. Strobl, Eric, 2003. "Is Education Used as a Signaling Device for Productivity in Developing Countries? Evidence from Ghana," IZA Discussion Papers 683, Institute of Labor Economics (IZA).

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