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Schooling as Human Capital or a Signal: Some Evidence

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  • Eugene A. Kroch
  • Kriss Sjoblom

Abstract

A new way is proposed to distinguish between the human capital and the signaling theories of the value of education. If education is a signal, then the essence of the signal should be distilled in the position of an individual in the distribution of education for his cohort. Estimating earnings equations that include both absolute (years) and relative (percentile) measures of education provides a test of the two competing theories. Analyzing two separate panel data sources under a range of alternative specifications, we find that the years measure of schooling has a consistently significant positive effect on earnings, but that the rank measure rarely does. This evidence supports the conclusion that human capital rather than signaling is the predominant explanation of schooling's value.

Suggested Citation

  • Eugene A. Kroch & Kriss Sjoblom, 1994. "Schooling as Human Capital or a Signal: Some Evidence," Journal of Human Resources, University of Wisconsin Press, vol. 29(1), pages 156-180.
  • Handle: RePEc:uwp:jhriss:v:29:y:1994:i:1:p:156-180
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    Cited by:

    1. Larry Howard & Thomas Tang & M. Jill Austin, 2015. "Teaching Critical Thinking Skills: Ability, Motivation, Intervention, and the Pygmalion Effect," Journal of Business Ethics, Springer, vol. 128(1), pages 133-147, April.
    2. Sebastian Stolorz, 2005. "A Test of the Signalling Hypothesis - Evidence from Natural Experiment," Labor and Demography 0512008, EconWPA.
    3. Spetz, Joanne, 2002. "The value of education in a licensed profession: the choice of associate or baccalaureate degrees in nursing," Economics of Education Review, Elsevier, vol. 21(1), pages 73-85, February.
    4. Steven F. Koch & S. Ssekabira Ntege, 2008. "Returns To Schooling: Skills Accumulation Or Information Revelation?," Working Papers 200812, University of Pretoria, Department of Economics.
    5. Arnaud Chevalier & Colm Harmon & Ian Walker & Yu Zhu, 2004. "Does Education Raise Productivity, or Just Reflect it?," Economic Journal, Royal Economic Society, vol. 114(499), pages 499-517, November.
    6. Peter Havlik & Sebastian Leitner & Robert Stehrer, 2012. "Growth Resurgence, Productivity Catching-up and Labour Demand in Central and Eastern European Countries," Chapters,in: Industrial Productivity in Europe, chapter 8 Edward Elgar Publishing.
    7. Dolton, P. J. & Vignoles, A., 2002. "Is a broader curriculum better?," Economics of Education Review, Elsevier, vol. 21(5), pages 415-429, October.
    8. Griliches, Zvi, 1997. "Education, Human Capital, and Growth: A Personal Perspective," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 330-344, January.
    9. Ulla Hämäläinen & Roope Uusitalo, 2008. "Signalling or Human Capital: Evidence from the Finnish Polytechnic School Reform," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(4), pages 755-775, December.
    10. Perri, Timothy J., 2002. "Signaling versus contingent contracts with costly turnover," Journal of Economic Behavior & Organization, Elsevier, vol. 48(4), pages 365-374, August.
    11. Denis Maguain, 2007. "Les rendements de l'éducation en comparaison internationale," Économie et Prévision, Programme National Persée, vol. 180(4), pages 87-106.
    12. Robert Wagner & Thomas Zwick, 2012. "How Acid are Lemons? Adverse Selection and Signalling for Skilled Labour Market Entrants," Economics of Education Working Paper Series 0071, University of Zurich, Department of Business Administration (IBW), revised Feb 2012.
    13. Alexander J. Cowell, 2006. "The relationship between education and health behavior: some empirical evidence," Health Economics, John Wiley & Sons, Ltd., vol. 15(2), pages 125-146.
    14. Uschi Backes-Gellner & Stephan Veen, 2006. "Incentives for Schools, Educational Signals and Labour Market Outcomes," Economics of Education Working Paper Series 0009, University of Zurich, Department of Business Administration (IBW), revised Jun 2006.
    15. Dolton, Peter & Vignoles, Anna, 2000. "The incidence and effects of overeducation in the U.K. graduate labour market," Economics of Education Review, Elsevier, vol. 19(2), pages 179-198, April.
    16. Bergh, Andreas & Fink, Günther, 2009. "Higher education, elite institutions and inequality," European Economic Review, Elsevier, vol. 53(3), pages 376-384, April.
    17. repec:ebl:ecbull:v:9:y:2005:i:4:p:1-7 is not listed on IDEAS
    18. Luisa Rosti & Chikara Yamaguchi & Carolina Castagnetti, 2005. "Educational Performance as Signalling Device: Evidence from Italy," Economics Bulletin, AccessEcon, vol. 9(4), pages 1-7.
    19. M. De Paola & V. Scoppa, 2007. "Returns to skills, incentives to study and optimal educational standards," Journal of Economics, Springer, vol. 92(3), pages 229-262, December.
    20. Nohora Y. Forero Ramírez & Manuel Ramírez Gómez, 2008. "Determinantes de los ingresos laborales de los graduados universitarios durante el período 2001-2004," DOCUMENTOS DE TRABAJO 004591, UNIVERSIDAD DEL ROSARIO.
    21. Adrian Chadi & Marco de Pinto & Gabriel Schultze, 2017. "Young, Gifted and Lazy? The Role of Ability and Labor Market Prospects in Student Effort Decisions," IAAEU Discussion Papers 201705, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    22. Carolina Castagnetti & Luisa Rosti & Marina Toepfer, 2017. "Overeducation and the Gender Pay Gap in Italy. A Double Selectivity Approach," DEM Working Papers Series 144, University of Pavia, Department of Economics and Management.
    23. repec:ucn:wpaper:10197/1104 is not listed on IDEAS
    24. Philip A. Trostel, 2005. "Nonlinearity in the return to education," Journal of Applied Economics, Universidad del CEMA, vol. 8, pages 191-202, May.
    25. Peter Havlik & Sebastian Leitner & Robert Stehrer, 2008. "Growth Resurgence, Productivity Catching-up and Labour Demand in CEECs," wiiw Statistical Reports 3, The Vienna Institute for International Economic Studies, wiiw.

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