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Signalling or Human Capital: Evidence from the Finnish Polytechnic School Reform

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  • Ulla Hämäläinen
  • Roope Uusitalo

Abstract

We use data from the Finnish polytechnic reform to distinguish between human capital and signalling theories of the value of education. We find that the reform increased the earnings of polytechnic graduates compared with those graduating from the same schools before the reform, as predicted by both the human capital and the signalling models. However, we also find that the relative earnings of vocational college graduates decrease after polytechnic graduates start entering the labour market. This finding is inconsistent with the pure human capital model and can be interpreted as evidence that supports the signalling model. Copyright © The editors of the "Scandinavian Journal of Economics" 2008 .

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  • Ulla Hämäläinen & Roope Uusitalo, 2008. "Signalling or Human Capital: Evidence from the Finnish Polytechnic School Reform," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(4), pages 755-775, December.
  • Handle: RePEc:bla:scandj:v:110:y:2008:i:4:p:755-775
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    References listed on IDEAS

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    1. Joshua D. Angrist & Alan B. Krueger, 1991. "Estimating the Payoff to Schooling Using the Vietnam-era Draft Lottery," Working Papers 670, Princeton University, Department of Economics, Industrial Relations Section..
    2. 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.
    3. Arnaud Chevalier & Colm Harmon & Ian Walker & Yu Zhu, 2004. "Does Education Raise Productivity, or Just Reflect it?," Economic Journal, Royal Economic Society, vol. 114(499), pages 499-517, November.
    4. Kevin Lang & David Kropp, 1986. "Human Capital Versus Sorting: The Effects of Compulsory Attendance Laws," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 609-624.
    5. Riley, John G, 1979. "Testing the Educational Screening Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 227-252, October.
    6. Joshua D. Angrist & Alan B. Keueger, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 979-1014.
    7. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
    8. Eugene A. Kroch & Kriss Sjoblom, 1994. "Schooling as Human Capital or a Signal: Some Evidence," Journal of Human Resources, University of Wisconsin Press, vol. 29(1), pages 156-180.
    9. Uusitalo, Roope, 1999. "Return to education in Finland," Labour Economics, Elsevier, vol. 6(4), pages 569-580, November.
    10. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
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    Cited by:

    1. Annika C. Froehlich, 2016. "Does the curricular structure affect doctoral enrolment?," Journal of Business Economics, Springer, vol. 86(9), pages 1067-1089, December.
    2. Verena Dill & Anke Hammen, 2011. "Einkommensdifferenziale zwischen Bachelor- und Diplomabsolventen - Humankapital oder Signal?," Research Papers in Economics 2011-04, University of Trier, Department of Economics.
    3. Oppedisano, Veruska, 2014. "Higher education expansion and unskilled labour market outcomes," Economics of Education Review, Elsevier, vol. 40(C), pages 205-220.
    4. Böckerman, Petri & Haapanen, Mika, 2010. "The effect of education on migration: Evidence from school reform," MPRA Paper 27629, University Library of Munich, Germany.
    5. CARRIERI, Vincenzo & D'AMATO, Marcello & ZOTTI, Roberto, 2013. "Selective Admission Tests and Students' Performances. Evidence from a Natural Experiment in a Large Italian University," CELPE Working Papers 0/00, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
    6. Petri Böckerman & Mika Haapanen, 2013. "The effect of polytechnic reform on migration," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(2), pages 593-617, April.
    7. Yuki, Kazuhiro, 2009. "Education, Signaling, and Wage Inequality in a Dynamic Economy," MPRA Paper 16982, University Library of Munich, Germany.
    8. Böckerman, Petri & Haapanen, Mika & Jepsen, Christopher, 2015. "Back to School? Labor-Market Returns to Vocational Postsecondary Education," IZA Discussion Papers 9079, Institute for the Study of Labor (IZA).

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