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Job Matching and the Returns to Educational Signals

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  • Habermalz, Steffen

    (University of Mannheim)

Abstract

This paper develops a multi-period model, in which workers are matched with jobs according to imperfect educational signals and in which their subsequent productivities depend on both their inherent ability and on the quality of the job match. It outlines a sequential process, in which underpaid employees reveal their true productivities and overpaid employees are detected by the firm until every match is perfect. The model produces a time path of the returns to educational signals that is concave, a feature that earlier studies used to dismiss educational signaling. Using a synthetic panel data set from the Current Population Survey the theoretical result is then substantiated empirically. The paper contributes to the literature by establishing the possibility of increasing returns to education over part of a workers life within the signaling framework theoretically and empirically.

Suggested Citation

  • Habermalz, Steffen, 2003. "Job Matching and the Returns to Educational Signals," IZA Discussion Papers 726, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp726
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    References listed on IDEAS

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    Cited by:

    1. Robert Gibbons & Michael Waldman, 2006. "Enriching a Theory of Wage and Promotion Dynamics inside Firms," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 59-108, January.
    2. Francesc Dilme & Fei Li, 2012. "Dynamic Education Signaling with Dropout," PIER Working Paper Archive 12-023, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Hui, Taylor Shek-wai, 2004. "The “Sheepskin Effects” of Canadian Credentials," MPRA Paper 17994, University Library of Munich, Germany.
    4. Francesc Dilme & Fei Li:, 2012. "Dynamic Education Signaling with Dropout, Second Version," PIER Working Paper Archive 13-048, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 03 Sep 2013.
    5. Francesc Dilme & Fei Li, 2013. "Dynamic Education Signaling with Dropout Risk, Third Version," PIER Working Paper Archive 14-014, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 24 Apr 2014.

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    More about this item

    Keywords

    returns to education; signaling; job matching; information;
    All these keywords.

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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