Endogenous Quality Choice, Signaling, and Welfare
We consider a model in which each worker endogenously selects his own type through a private investment decision and selects a public signal in the labor market. Signaling then contributes to social welfare through its influence on the quality choice. We offer a rationale for the argument that there are too many high-type workers from a welfare perspective, identifying circumstances under which separating equilibrium generates too many high-type workers while having to use the incentive-compatible signal and treat high-type workers differently in the market. The inefficiency can then be reduced in pooling equilibrium.
|Date of creation:||2013|
|Date of revision:||2016|
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- Kelly Bedard, 2001.
"Human Capital versus Signaling Models: University Access and High School Dropouts,"
Journal of Political Economy,
University of Chicago Press, vol. 109(4), pages 749-775, August.
- Kelly Bedard, "undated". "Human Capital Versus Signaling Models: University Access and High School Drop-outs," Claremont Colleges Working Papers 1999-01, Claremont Colleges.
- Kelly Bedard, "undated". "Human Capital Versus Signaling Models: University Access and High School Drop-outs," Canadian International Labour Network Working Papers 19, McMaster University.
- In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 179-221.
- In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
- John G. Riley, 2001. "Silver Signals: Twenty-Five Years of Screening and Signaling," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 432-478, June.
- Wolpin, Kenneth I, 1977. "Education and Screening," American Economic Review, American Economic Association, vol. 67(5), pages 949-958, December.
- Riley, John G, 1979. "Testing the Educational Screening Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 227-252, October.
- Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374. Full references (including those not matched with items on IDEAS)
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