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Diploma as signal? Estimating sheepskin effects in the Philippines

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  • Olfindo, Rosechin

Abstract

The screening theory of education argues that education does not necessarily enhance worker’s productivity, but serves only as a signal of worker’s pre-existing ability. Empirical studies found that the mere possession of a diploma increases wages disproportionately than without it, or the so-called sheepskin effects. Using a sample of urban non-agricultural wage workers in the Philippines, this paper finds substantial sheepskin effects for holding a tertiary diploma, even after controlling for individual heterogeneity. While returns to tertiary education are lower in the competitive (private) sector, there is evidence of diverging age-earnings profiles between tertiary and secondary graduates, indicating a productive value higher education.

Suggested Citation

  • Olfindo, Rosechin, 2018. "Diploma as signal? Estimating sheepskin effects in the Philippines," International Journal of Educational Development, Elsevier, vol. 60(C), pages 113-119.
    • Handle: RePEc:eee:injoed:v:60:y:2018:i:c:p:113-119
    DOI: 10.1016/j.ijedudev.2017.11.001
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