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Admission standards, student effort, and the creation of skilled jobs

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  • Blankenau, William F.
  • Gao, Yuan

Abstract

We consider the implications of expanding enrollment through lower standards in a model with human capital externalities and a market failure. Workers and firms make uncoordinated investment choices prior to random matching. Investment choices depend on the expected productivity of the counterpart in production. The setting generates a potential human capital externality as a more skilled labor force induces more skilled job openings. Exploiting the externality is complicated by a market failure which may cause some workers to earn a degree but not put forth the effort required to become highly skilled. We show that beyond a threshold, increased enrollment through low standards can be poor policy. Policies which increase returns to agents and firms in best matches can improve outcomes.

Suggested Citation

  • Blankenau, William F. & Gao, Yuan, 2014. "Admission standards, student effort, and the creation of skilled jobs," Economic Modelling, Elsevier, vol. 43(C), pages 209-216.
    • Handle: RePEc:eee:ecmode:v:43:y:2014:i:c:p:209-216
    DOI: 10.1016/j.econmod.2014.07.041
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