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Human capital, signaling, and the pattern of returns to education

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  • Harley Frazis

Abstract

This paper analyzes the implications of the pattern of returns to education for human capital and signaling models. The US Current Population Survey shows diploma effects and small returns to the interval just before college graduation. A human capital model explains this pattern only under special circumstances unlikely to be stable. A Spence-type signaling model can explain diploma effects, but not the low return prior to graduation unless there is substantial measurement error. I propose an extension of the signaling model where agents are initially unsure of their ability. Copyright 2002, Oxford University Press.

Suggested Citation

  • Harley Frazis, 2002. "Human capital, signaling, and the pattern of returns to education," Oxford Economic Papers, Oxford University Press, vol. 54(2), pages 298-320, April.
    • Handle: RePEc:oup:oxecpp:v:54:y:2002:i:2:p:298-320
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    Cited by:

    1. Hornig, Stephan O. & Rottmann, Horst & Wapler, Rüdiger, 2011. "Sorting on the labour market: A literature overview and theoretical framework," Weidener Diskussionspapiere 27, University of Applied Sciences Amberg-Weiden (OTH).
    2. Hui, Taylor Shek-wai, 2004. "The “Sheepskin Effects” of Canadian Credentials," MPRA Paper 17994, University Library of Munich, Germany.
    3. Orlanda Tavares & Cristina Sin & Carla Sá & Francisco Pereira & Alberto Amaral, 2023. "Graduate employment: Does the type of higher education institution matter?," Bulletin of Economic Research, Wiley Blackwell, vol. 75(4), pages 1140-1156, October.
    4. Chadi, Adrian & de Pinto, Marco & Schultze, Gabriel, 2019. "Young, gifted and lazy? The role of ability and labor market prospects in student effort decisions," Economics of Education Review, Elsevier, vol. 72(C), pages 66-79.
    5. Kun Andras Istvan, 2014. "The Sheepskin Effect In The Hungarian Labour Market 2010-2012: Analysis Of Data From The Hungarian Graduate Tracking System," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 492-499, July.
    6. Francesc Dilme & Fei Li:, 2012. "Dynamic Education Signaling with Dropout, Second Version," PIER Working Paper Archive 13-048, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 03 Sep 2013.
    7. Francesc Dilme & Fei Li, 2013. "Dynamic Education Signaling with Dropout Risk, Third Version," PIER Working Paper Archive 14-014, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 24 Apr 2014.
    8. Damon Clark & Paco Martorell, 2014. "The Signaling Value of a High School Diploma," Journal of Political Economy, University of Chicago Press, vol. 122(2), pages 282-318.
    9. Dror Etzion, 2014. "Diffusion as Classification," Organization Science, INFORMS, vol. 25(2), pages 420-437, April.
    10. Zilun Zhi & Fangyi Zhao, 2021. "Route study on patterns of poverty alleviation through vocational education under the background of rural vitalization," Poverty & Public Policy, John Wiley & Sons, vol. 13(1), pages 69-92, March.
    11. Habermalz, Steffen, 2003. "Job Matching and the Returns to Educational Signals," IZA Discussion Papers 726, Institute of Labor Economics (IZA).
    12. Francesc Dilme & Fei Li, 2012. "Dynamic Education Signaling with Dropout," PIER Working Paper Archive 12-023, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    13. Habermalz, Steffen, 2003. "An Examination of Sheepskin Effects Over Time," IZA Discussion Papers 725, Institute of Labor Economics (IZA).
    14. Strobl, Eric, 2003. "Is Education Used as a Signaling Device for Productivity in Developing Countries? Evidence from Ghana," IZA Discussion Papers 683, Institute of Labor Economics (IZA).

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