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Does Speed Signal Ability? The Impact of Grade Repetitions on Employment and Wages

Author

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  • Brodaty, Thomas
  • Gary-Bobo, Robert J.
  • Prieto, Ana

Abstract

We propose a new test for the presence of job-market signalling in the sense of Spence (1973), based on an equation in which log-wages are explained by two endogenous variables: the student's degree and the student's time to degree, not simply by years of education. Log-wages are regressed on a measure of education, which is a position on a scale of certificates and degrees, and a measure of the student delay, defined as the difference between the individual's school-leaving age and the average school-leaving age of students holding the same certificate or degree. We use past school-opening instruments, and distance-to-the-nearest-college, also measured in the past, when students were entering grade 6, to identify the parameters. We find a robust, significant and negative impact of the delay variable on wages, averaged over the first five years of career. A year of delay causes a 9% decrease of the student's wage. The only reasonable explanation for this effect is the fact that longer delays signal unobserved characteristics with a negative productivity value. We finally estimate a nonlinear model of education choices and cannot reject the assumption that the data is generated by a job-market signalling equilibrium.

Suggested Citation

  • Brodaty, Thomas & Gary-Bobo, Robert J. & Prieto, Ana, 2008. "Does Speed Signal Ability? The Impact of Grade Repetitions on Employment and Wages," CEPR Discussion Papers 6832, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6832
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    Citations

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    Cited by:

    1. Gianfranco DE SIMONE, 2012. "Render unto primary the things which are primary's. Inherited and fresh learning divides in Italian lower secondary education," Departmental Working Papers 2012-14, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    2. Giorgia Casalone & Carmen Aina, 2011. "Does time-to-degree matter? The effect of delayed graduation on employment and wages," Working Papers 38, AlmaLaurea Inter-University Consortium.
    3. Marion Gousse, 2014. "Marriage Market and Intra-Household Allocation. Essays in Economics of Family and Education," Sciences Po publications info:hdl:2441/6tve7u8o9k9, Sciences Po.
    4. Domadenik, Polona & Far?nik, Daša & Pastore, Francesco, 2013. "Horizontal Mismatch in the Labour Market of Graduates: The Role of Signalling," IZA Discussion Papers 7527, Institute for the Study of Labor (IZA).
    5. Avdic, Daniel & Gartell, Marie, 2011. "The study pace among college students before and after a student aid reform: some Swedish results," Arbetsrapport 2011:7, Institute for Futures Studies.
    6. Katja Görlitz & Barbara S. Grave, 2012. "Wage Differentials by Field of Study – The Case of German University Graduates," Ruhr Economic Papers 0316, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    7. repec:zbw:rwirep:0316 is not listed on IDEAS
    8. Carmen Aina & Eliana Baici & Giorgia Casalone, 2010. "Time-to-Degree: Students' Abilities, University Characteristics or What Else? Evidence from Italy," Working Papers 130, SEMEQ Department - Faculty of Economics - University of Eastern Piedmont.
    9. Aina, Carmen & Pastore, Francesco, 2012. "Delayed Graduation and Overeducation: A Test of the Human Capital Model versus the Screening Hypothesis," IZA Discussion Papers 6413, Institute for the Study of Labor (IZA).
    10. Barbara S. Grave & Katja Goerlitz, 2012. "Wage differentials by field of study -- the case of German university graduates," Education Economics, Taylor & Francis Journals, vol. 20(3), pages 284-302, March.
    11. Carmen Aina, 2011. "The Determinants of Success and Failure of Italian University Students. Evidence from administrative data," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 119(2), pages 85-108.
    12. De Simone, Gianfranco, 2013. "Render unto primary the things which are primary's: Inherited and fresh learning divides in Italian lower secondary education," Economics of Education Review, Elsevier, vol. 35(C), pages 12-23.

    More about this item

    Keywords

    grade repetitions; Returns to education; Signalling; time to degree; wages;

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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