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Human Capital vs. Signalling Explanations of Wages

The key difference between signalling and human capital models is that signalling models allow firms to draw inferences about unobserved characteristics of workers. Those inferences can be based on the schooling or work experience of workers, or on direct measures of some aspects of job performance. Many recent empirical findings can be better explained by signalling models than by human capital theory. Given the explanatory power of signalling models, standard estimates of the social return to secondary schooling are in large part capturing differences in affective traits, such as perseverance, which were acquired either in primary school or at home.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.9.4.133
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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 9 (1995)
Issue (Month): 4 (Fall)
Pages: 133-154

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Handle: RePEc:aea:jecper:v:9:y:1995:i:4:p:133-54
Note: DOI: 10.1257/jep.9.4.133
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  2. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
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  4. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
  5. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
  6. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
  7. Andrew Weiss, 1984. "Testing the Sorting Model of Education," NBER Working Papers 1420, National Bureau of Economic Research, Inc.
  8. Wood, Robert G & Corcoran, Mary E & Courant, Paul N, 1993. "Pay Differences among the Highly Paid: The Male-Female Earnings Gap in Lawyers' Salaries," Journal of Labor Economics, University of Chicago Press, vol. 11(3), pages 417-41, July.
  9. Akerlof, George A & Katz, Lawrence F, 1989. "Workers' Trust Funds and the Logic of Wage Profiles," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 525-36, August.
  10. Lisa M. Lynch, 1994. "Training and the Private Sector: International Comparisons," NBER Books, National Bureau of Economic Research, Inc, number lync94-1.
  11. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  12. Lang, Kevin, 1994. "Does the Human-Capital/Educational-Sorting Debate Matter for Development Policy?," American Economic Review, American Economic Association, vol. 84(1), pages 353-58, March.
  13. Joseph E. Stiglitz, 1973. "The Theory of 'Screening', Education, and the Distribution of Income," Cowles Foundation Discussion Papers 354, Cowles Foundation for Research in Economics, Yale University.
  14. Salop, Joanne & Salop, Steven, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 619-27, November.
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  16. Marshall, Robert C & Zarkin, Gary A, 1987. "The Effect of Job Tenure on Wage Offers," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 301-24, July.
  17. Joseph G. Altonji, 1995. "The Effects of High School Curriculum on Education and Labor Market Outcomes," Journal of Human Resources, University of Wisconsin Press, vol. 30(3), pages 409-438.
  18. Kletzer, Lori Gladstein, 1989. "Returns to Seniority after Permanent Job Loss," American Economic Review, American Economic Association, vol. 79(3), pages 536-43, June.
  19. Joanne Salop & Steve Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
  20. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1989. "Job Matching and On-the-Job Training," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 1-19, January.
  21. Weiss, Andrew, 1984. "Determinants of Quit Behavior," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 371-87, July.
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  23. Lisa M. Lynch, 1994. "Introduction to "Training and the Private Sector"," NBER Chapters, in: Training and the Private Sector: International Comparisons, pages 1-24 National Bureau of Economic Research, Inc.
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