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Signaling and optimal sorting

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  • Timothy Perri

    (Appalachian State University)

Abstract

I consider educational signaling of inherent ability that facilitates sorting of individuals between sectors. More able individuals are more productive in the primary sector, and less able individuals are more productive in the secondary sector. I find signaling may increase but never maximizes welfare, and is more likely to increase welfare the greater is productivity in the secondary sector, and, possibly, the lower is productivity in the primary sector. Consistent with recent increased undergraduate enrollment in the U.S, excessive signaling occurs by less able individuals. If education increases human capital, total welfare likely increases although more individuals may over-invest in education.

Suggested Citation

  • Timothy Perri, 2019. "Signaling and optimal sorting," Journal of Economics, Springer, vol. 126(2), pages 135-151, March.
    • Handle: RePEc:kap:jeczfn:v:126:y:2019:i:2:d:10.1007_s00712-018-0618-0
    DOI: 10.1007/s00712-018-0618-0
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    Cited by:

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    2. Maurício Benegas & Márcio Veras Corrêa, 2020. "Educational supply policies: distortions and labor market performance," Journal of Economics, Springer, vol. 129(3), pages 203-239, April.

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    More about this item

    Keywords

    Signaling; Sorting; welfare;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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