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Education Signaling with Uncertain Returns

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  • Regev Tali

    (Tel Aviv University)

Abstract

This paper develops and explores signaling in the market for education based on imperfectly observed heterogeneity in the returns to education rather than heterogeneity in costs. Workers of heterogeneous abilities face the same costs of education, yet the productivity gain from education is higher for more able workers, and employers' observations of productivity are noisy. The paper presents the necessary and sufficient condition replacing the single crossing property in this context, proves that no separating equilibrium exists, and analyzes the mixed strategy equilibrium to produce some new results due to the presence of strategic complementarities.

Suggested Citation

  • Regev Tali, 2012. "Education Signaling with Uncertain Returns," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-31, August.
    • Handle: RePEc:bpj:bejtec:v:12:y:2012:i:1:n:27
    DOI: 10.1515/1935-1704.1867
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    References listed on IDEAS

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    1. Blackburn, McKinley L & Neumark, David, 1995. "Are OLS Estimates of the Return to Schooling Biased Downward? Another Look," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 217-230, May.
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    7. Orley Ashenfelter & Cecilia Rouse, 1998. "Income, Schooling, and Ability: Evidence from a New Sample of Identical Twins," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(1), pages 253-284.
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    9. Arrow, Kenneth J., 1973. "Higher education as a filter," Journal of Public Economics, Elsevier, vol. 2(3), pages 193-216, July.
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    Cited by:

    1. Timothy Perri, 2019. "Signaling and optimal sorting," Journal of Economics, Springer, vol. 126(2), pages 135-151, March.
    2. Kolpin, Van & Stater, Mark, 2024. "The perverse equilibrium effects of state and federal student aid in higher education," Journal of Economic Behavior & Organization, Elsevier, vol. 217(C), pages 679-691.
    3. Davidson, Carl & Sly, Nicholas, 2014. "A simple model of globalization, schooling and skill acquisition," European Economic Review, Elsevier, vol. 71(C), pages 209-227.

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