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A Test of the Signalling Hypothesis - Evidence from Natural Experiment

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  • Sebastian Stolorz

    (University of Oregon)

Abstract

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.

Suggested Citation

  • Sebastian Stolorz, 2005. "A Test of the Signalling Hypothesis - Evidence from Natural Experiment," Labor and Demography 0512008, EconWPA.
  • Handle: RePEc:wpa:wuwpla:0512008
    Note: Type of Document - pdf; pages: 39
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/lab/papers/0512/0512008.pdf
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    References listed on IDEAS

    as
    1. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-229, April.
    2. David Card, 1994. "Earnings, Schooling, and Ability Revisited," Working Papers 710, Princeton University, Department of Economics, Industrial Relations Section..
    3. Eng Seng Loh, 1994. "Employment Probation as a Sorting Mechanism," ILR Review, Cornell University, ILR School, vol. 47(3), pages 471-486, April.
    4. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-125, March.
    5. 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.
    6. Riley, John G, 1979. "Testing the Educational Screening Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 227-252, October.
    7. Andrew Weiss, 1995. "Human Capital vs. Signalling Explanations of Wages," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 133-154, Fall.
    8. Roger Klein & Richard Spady & Andrew Weiss, 1991. "Factors Affecting the Output and Quit Propensities of Production Workers," Review of Economic Studies, Oxford University Press, vol. 58(5), pages 929-953.
    9. 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.
    10. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Human Capital; Signal;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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