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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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    References listed on IDEAS

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    1. Stiglitz, Joseph E, 1975. "The Theory of "Screening," Education, and the Distribution of Income," American Economic Review, American Economic Association, vol. 65(3), pages 283-300, June.
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    7. Arrow, Kenneth J., 1973. "Higher education as a filter," Journal of Public Economics, Elsevier, vol. 2(3), pages 193-216, July.
    8. 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.
    9. Wolpin, Kenneth I, 1977. "Education and Screening," American Economic Review, American Economic Association, vol. 67(5), pages 949-958, December.
    10. Peter Arcidiacono & Jane Cooley & Andrew Hussey, 2008. "The Economic Returns To An Mba," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 873-899, August.
    11. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning and Statistical Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 313-350.
    12. Psacharopoulos, George, 1979. "On the weak versus the strong version of the screening hypothesis," Economics Letters, Elsevier, vol. 4(2), pages 181-185.
    13. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
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    Citations

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    Cited by:

    1. repec:eee:labeco:v:45:y:2017:i:c:p:131-142 is not listed on IDEAS
    2. Valerie Bostwick, 2016. "Signaling In Higher Education: The Effect Of Access To Elite Colleges On Choice Of Major," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1383-1401, July.
    3. MORIKAWA Masayuki, 2013. "Postgraduate Education, Labor Participation, and Wages: An empirical analysis using micro data from Japan," Discussion papers 13065, Research Institute of Economy, Trade and Industry (RIETI).
    4. repec:etc:journl:y:2018:i:17:p:122-145 is not listed on IDEAS
    5. Zhang Wei-Bin, 2012. "Education and Human Capital Accumulation in a Two -Sector Growth Model with Elastic Labor Supply," Scientific Annals of Economics and Business, De Gruyter Open, vol. 59(1), pages 289-309, July.
    6. Fumihiko SUGA, 2017. "The Returns to Postgraduate Education," ESRI Discussion paper series 336, Economic and Social Research Institute (ESRI).
    7. repec:sgh:gosnar:y:2017:i:5:p:105-127 is not listed on IDEAS
    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.
    10. Oppedisano, Veruska, 2014. "Higher education expansion and unskilled labour market outcomes," Economics of Education Review, Elsevier, vol. 40(C), pages 205-220.
    11. Megan Way & Yunwei Gai & Lidija Polutnik, 2016. "Compensation and Employment Impact of a Full-time MBA Program," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 22(1), pages 49-63, February.
    12. Wei-Bin ZHANG, 2014. "Human Capital, Wealth, and Renewable Resources," Expert Journal of Economics, Sprint Investify, vol. 2(1), pages 1-20.
    13. Matthew Calver, 2015. "Closing the Aboriginal Education Gap in Canada: The Impact on Employment, GDP, and Labour Productivity," International Productivity Monitor, Centre for the Study of Living Standards, vol. 28, pages 27-46, Spring.

    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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