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Education Signaling with Uncertain Returns

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  • Regev Tali

    (Tel Aviv University)

Abstract

This paper develops and explores signaling in the market for education based on imperfectly observed heterogeneity in the returns to education rather than heterogeneity in costs. Workers of heterogeneous abilities face the same costs of education, yet the productivity gain from education is higher for more able workers, and employers' observations of productivity are noisy. The paper presents the necessary and sufficient condition replacing the single crossing property in this context, proves that no separating equilibrium exists, and analyzes the mixed strategy equilibrium to produce some new results due to the presence of strategic complementarities.

Suggested Citation

  • Regev Tali, 2012. "Education Signaling with Uncertain Returns," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-31, August.
    • Handle: RePEc:bpj:bejtec:v:12:y:2012:i:1:n:27
    DOI: 10.1515/1935-1704.1867
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    References listed on IDEAS

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    3. Timothy Perri, 2019. "Signaling and optimal sorting," Journal of Economics, Springer, vol. 126(2), pages 135-151, March.

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    Keywords

    signaling; returns to education;

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