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Education choices and job market characteristics


  • Liu, Qianshuo
  • Macho-Stadler, Inés


We propose a simple three-stage model where heterogeneous schools compete via tuition fees, individuals with the ex-ante unknown ability make their education choices to (eventually) get a diploma and reveal their ability, and finally the job market determines the assignment of workers to firms and the equilibrium wages. In equilibrium, wages in the labor market and schools’ fees and individuals’ school choices are strongly related. We also analyze the effects of the existence of a public school or a subsidy on social welfare.

Suggested Citation

  • Liu, Qianshuo & Macho-Stadler, Inés, 2023. "Education choices and job market characteristics," Economics Letters, Elsevier, vol. 223(C).
  • Handle: RePEc:eee:ecolet:v:223:y:2023:i:c:s0165176523000101
    DOI: 10.1016/j.econlet.2023.110985

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    References listed on IDEAS

    1. Raphael Boleslavsky & Christopher Cotton, 2015. "Grading Standards and Education Quality," American Economic Journal: Microeconomics, American Economic Association, vol. 7(2), pages 248-279, May.
    2. Maitreesh Ghatak & Massimo Morelli & Tomas Sjöström, 2001. "Occupational Choice and Dynamic Incentives," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 781-810.
    3. W. Bentley MacLeod & Miguel Urquiola, 2019. "Is Education Consumption or Investment? Implications for School Competition," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 563-589, August.
    4. Christopher Flinn & Joseph Mullins, 2015. "Labor Market Search And Schooling Investment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56, pages 359-398, May.
    5. Christopher Flinn & Joseph Mullins, 2015. "Labor Market Search And Schooling Investment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(2), pages 359-398, May.
    6. John William Hatfield & Fuhito Kojima & Scott Duke Kominers, 2014. "Investment Incentives in Labor Market Matching," American Economic Review, American Economic Association, vol. 104(5), pages 436-441, May.
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    More about this item


    Education choices; Skills; Job market;
    All these keywords.

    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory


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