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The choice of majors as a signaling device

Author

Listed:
  • Javier Nuñez

    (Universidad de Chile)

  • Andres Otero

    (Universidad de Chile)

Abstract

This work analyzes the ability signaling hypothesis using a rich set of data of a homogeneous population -Business and Economics graduates of University X- who share similar occupations in the labor market. After studying three years of a common core curriculum, students must choose between either a Business or an Economics major. The work investigates if the choice of major is employed by the labor market as a signal of ability and of expected productivity, and if this is reflected in differences in the earnings profiles of graduates of each field. Given the detailed nature of the data, we employ an unusually rich measure of ability, namely the grades obtained in the core curriculum. This work presents multiple evidence in favor of this hypothesis. The evidence is based on seven empirical results, properly derived from a simple theoretical signaling model. The empirical facts support the signaling hypothesis under the assumption that an individual's ability is gradually revealed to the labor market as experience increases.

Suggested Citation

  • Javier Nuñez & Andres Otero, 2005. "The choice of majors as a signaling device," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 20(1), pages 23-43, June.
  • Handle: RePEc:ila:anaeco:v:20:y:2005:i:1:p:23-43
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    References listed on IDEAS

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    Cited by:

    1. Lourdes Espinoza & Carlos Gustavo Machicado & Katia Makhlouf, 2007. "La Enseñanza de Economía en Bolivia y Chile," Development Research Working Paper Series 10/2007, Institute for Advanced Development Studies.
    2. Carlos Gustavo Machado & Lourdes Espinoza & Katia Makhlouf, 2009. "La enseñanza de economía en Bolivia y Chile," Research Department Publications 4632, Inter-American Development Bank, Research Department.

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    More about this item

    Keywords

    Signaling; Choice of Majors; Human Capital;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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