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Human capital augmentation versus the signaling value of MBA education

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  • Hussey, Andrew

Abstract

Panel data on MBA graduates is used in an attempt to empirically distinguish between human capital and signaling models of education. The existence of employment observations prior to MBA enrollment allows for the control of unobserved ability or selection into MBA programs (through the use of individual fixed effects). In addition, variation in the amount of pre-MBA work experience allows for a test to distinguish between the models. In particular, a predominant signaling view is shown to predict smaller returns to the degree, the more pre-MBA work experience one has (controlling for total experience). Additionally, a unique feature of the data is that respondents were asked to report skills or abilities gained through their schooling, allowing us to determine the extent to which these purported skills are valued in the labor market. The combined evidence suggests that while human capital accumulation may contribute to the returns to an MBA, the majority of the returns is derived from the signaling/screening function of the degree.

Suggested Citation

  • Hussey, Andrew, 2012. "Human capital augmentation versus the signaling value of MBA education," Economics of Education Review, Elsevier, vol. 31(4), pages 442-451.
    • Handle: RePEc:eee:ecoedu:v:31:y:2012:i:4:p:442-451
    DOI: 10.1016/j.econedurev.2011.12.004
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    8. Matthew Calver, 2015. "Closing the Aboriginal Education Gap in Canada: Assessing Progress and Estimating the Economic Benefits," CSLS Research Reports 2015-03, Centre for the Study of Living Standards.
    9. Caroline Elliott & Kwok Tong Soo, 2012. "The Returns to an MBA Degree: The Impact of Programme Attributes," Working Papers 24284646, Lancaster University Management School, Economics Department.
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    More about this item

    Keywords

    Returns to education; Signaling;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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