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A Simple Economic Theory of Skill Accumulation and Schooling Decisions

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Author Info
William Blankenau (Kansas State University)
Gabriele Camera (Purdue University)

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Abstract

We propose a model of schooling that can account for the observed heterogeneity in workers' productivity and educational attainment. Identical unskilled agents can get a degree at a cost, but becoming skilled entails an additional unobservable effort cost. Individual labor can then be used as an input in pairwise production matches. Two factors affect students' desire to build human capital: degrees imperfectly signal productivity, and contract imperfections generate holdup problems. Multiple stationary equilibria exist, some of which are market failures characterized by a largely educated workforce of low average skill. Policy implications are explored. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2005.05.002
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Publisher Info
Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 9 (2006)
Issue (Month): 1 (January)
Pages: 93-115
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Handle: RePEc:red:issued:v:9:y:2006:i:1:p:93-115

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Related research
Keywords: Education Policy; Education Finance; Human Capital; Informational Frictions; Matching; Multiple Equilibria.;

Other versions of this item:

Find related papers by JEL classification:
D8 - Microeconomics - - Information, Knowledge, and Uncertainty
I2 - Health, Education, and Welfare - - Education
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October. [Downloadable!] (restricted)
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  2. Adrian Masters, 2004. "Firm level hiring policy with culturally biased testing," Discussion Papers 04-14, University at Albany, SUNY, Department of Economics. [Downloadable!]
  3. Joseph E. Stiglitz, 1973. "The Theory of 'Screening', Education, and the Distribution of Income," Cowles Foundation Discussion Papers 354, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  4. Snower, Dennis J., 1994. "The Low-Skill, Bad-Job Trap," CEPR Discussion Papers 999, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Gabriele Camera & Robert R. Reed & Christopher J. Waller, 2003. "Jack of All Trades or a Master of One? Specialization, Trade, and Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1275-1294, November. [Downloadable!] (restricted)
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  7. Moro, Andrea & Norman, Peter, 2003. "Affirmative action in a competitive economy," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 567-594, March. [Downloadable!] (restricted)
    Other versions:
  8. Weiss, Andrew, 1983. "A Sorting-cum-Learning Model of Education," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 420-42, June. [Downloadable!] (restricted)
  9. Bishop, John, 1987. "The Recognition and Reward of Employee Performance," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages S36-56, October. [Downloadable!] (restricted)
  10. Betts, Julian R, 1998. "The Impact of Educational Standards on the Level and Distribution of Earnings," American Economic Review, American Economic Association, vol. 88(1), pages 266-75, March. [Downloadable!] (restricted)
  11. William Blankenau & Gabriele Camera, 2009. "Public Spending on Education and the Incentives for Student Achievement," Economica, London School of Economics and Political Science, vol. 76(303), pages 505-527, 07. [Downloadable!] (restricted)
  12. Lazear, Edward, 1977. "Academic Achievement and Job Performance: Note," American Economic Review, American Economic Association, vol. 67(2), pages 252-54, March. [Downloadable!] (restricted)
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  14. Costrell, Robert M, 1994. "A Simple Model of Educational Standards," American Economic Review, American Economic Association, vol. 84(4), pages 956-71, September. [Downloadable!] (restricted)
  15. Weiss, Andrew, 1995. "Human Capital vs. Signalling Explanations of Wages," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 133-54, Fall. [Downloadable!] (restricted)
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  17. William Blankenau, 1999. "A Welfare Analysis of Policy Responses to the Skilled Wage Premium," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 820-849, October. [Downloadable!] (restricted)
  18. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August. [Downloadable!] (restricted)
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