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A Test of the Signalling Hypothesis - Evidence from Natural Experiment

  • Sebastian Stolorz

    (University of Oregon)

The paper proposes an alternative methodology for testing signalling hypothesis based on chances to get a job in a particular class of the job market. The individuals are ranked and matched by an external mechanism, based on preferences of employers in respect to actual observable and perceived unobservable attributes of individual. This paper tests existence of a relation between the set of observable and revealed attributes and the outcome of the game, specifically: whether signals associated with attained education plays a significant role in determining chances of the individual to get a job. The proposed model is empirically tested by applying a unique dataset from a natural experiment, conducted in Poland in years 2002-2005, where a relatively large set of job market candidates are offered a chance to get a paid internship at an attractive employer, with considerably great chances of getting a permanent job thereafter. Results support the hypothesis, that in the absence of revealed attributes, employers decisions depend upon signals on education. Whenever information is available, the significance of the signals diminishes.

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File URL: http://econwpa.repec.org/eps/lab/papers/0512/0512008.pdf
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Paper provided by EconWPA in its series Labor and Demography with number 0512008.

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Length: 39 pages
Date of creation: 15 Dec 2005
Date of revision:
Handle: RePEc:wpa:wuwpla:0512008
Note: Type of Document - pdf; pages: 39
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Andrew Weiss, 1995. "Human Capital vs. Signalling Explanations of Wages," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 133-154, Fall.
  2. Garen, John, 1984. "The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable," Econometrica, Econometric Society, vol. 52(5), pages 1199-1218, September.
  3. Roger Klein & Richard H. Spady & Andrew Weiss, 1987. "Factors Affecting the Output and Quit Propensities of Production Workers," NBER Working Papers 2184, National Bureau of Economic Research, Inc.
  4. Joseph Stiglitz & Andrew Weiss, 1990. "Sorting Out the Differences Between Signaling and Screening Models," NBER Technical Working Papers 0093, National Bureau of Economic Research, Inc.
  5. David Card, 1994. "Earnings, Schooling, and Ability Revisited," NBER Working Papers 4832, National Bureau of Economic Research, Inc.
  6. Eng Loh, 1994. "Employment probation as a sorting mechanism," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(3), pages 471-486, April.
  7. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
  8. 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.
  9. Eng Seng Loh, 1994. "Employment Probation as a Sorting Mechanism," ILR Review, Cornell University, ILR School, vol. 47(3), pages 471-486, April.
  10. Riley, John G, 1979. "Testing the Educational Screening Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S227-52, October.
  11. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-29, April.
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