Human Capital versus Signaling Models: University Access and High School Dropouts
Under the educational sorting hypothesis, an environment in which some individuals are constrained from entering university will be characterized by increased pooling at the high school graduation level, as compared to an environment with greater university access. This results because some potential high school dropouts and university enrollees choose the high school graduate designation in order to take advantage of high-ability individuals who are constrained from entering university. This is in stark contrast to human capital theory, which predicts higher university enrollment but identical high school dropout rates in regions with greater university access. I test the contradictory high school dropout predictions of the human capital and signaling models using NLSYM and NLSYW education data from the late 1960s and early 1970s. I find that labor markets that contain universities have higher high school dropout rates. This result is consistent with a signaling model and inconsistent with a pure human capital model.
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- Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
- repec:fth:prinin:317 is not listed on IDEAS
- David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," NBER Working Papers 4483, National Bureau of Economic Research, Inc.
- Kevin Lang & David Kropp, 1986. "Human Capital Versus Sorting: The Effects of Compulsory Attendance Laws," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 609-624.
- Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 629-649.
- David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," Working Papers 696, Princeton University, Department of Economics, Industrial Relations Section..
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