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The More Abstract the Better? Raising Education Cost for the Less Able when Education is a Signal

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  • Timothy Perri

Abstract

More able individuals may over-investment in education when education signals ability. If education directly increases productivity, increasing education cost for the less able may increase welfare by reducing over-investment by the more able, but will not do so if such cost is already either too small or too large because no over-investment then occurs. Increasing cost for the less able is most likely to increase welfare when education is relatively unproductive compared to the initial ability difference between more and less able individuals. Our results have implications for online education which may lower cost relatively more for the less able. Key Words: Signaling, pooling, and education cost

Suggested Citation

  • Timothy Perri, 2013. "The More Abstract the Better? Raising Education Cost for the Less Able when Education is a Signal," Working Papers 13-08, Department of Economics, Appalachian State University.
    • Handle: RePEc:apl:wpaper:13-08
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    File URL: http://econ.appstate.edu/RePEc/pdf/wp1308.pdf
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    References listed on IDEAS

    as
    1. Mailath George J. & Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1993. "Belief-Based Refinements in Signalling Games," Journal of Economic Theory, Elsevier, vol. 60(2), pages 241-276, August.
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    3. Riley, John G, 1979. "Informational Equilibrium," Econometrica, Econometric Society, vol. 47(2), pages 331-359, March.
    4. Michael Spence, 2002. "Signaling in Retrospect and the Informational Structure of Markets," American Economic Review, American Economic Association, vol. 92(3), pages 434-459, June.
    5. Timothy Perri, 2011. "Spence Revisited: Signaling and the Allocation of Individuals to Jobs," Working Papers 11-16, Department of Economics, Appalachian State University.
    6. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(2), pages 179-221.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    signaling; pooling; and education cost;
    All these keywords.

    JEL classification:

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

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