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A Signaling Theory of Education under the Presence of Career Concerns

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  • Hwang, Sun Joo

Abstract

A person's life consists of two important stages: the first stage as a student and the second stage as a worker. In an integrated model of education and career concerns, I analyze the welfare effects of education. In Spence's job market signaling model, education as a sorting device improves efficiency by mitigating the lemon market problem. In contrast, in the integrated model, education as a sorting device can be detrimental to social welfare, as it eliminates work incentives generated by career concerns.

Suggested Citation

  • Hwang, Sun Joo, 2016. "A Signaling Theory of Education under the Presence of Career Concerns," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 38(2), pages 87-101.
    • Handle: RePEc:zbw:kdijep:v:38:y:2016:i:2:p:87-101
    DOI: 10.23895/kdijep.2016.38.2.87
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    References listed on IDEAS

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    3. Arijit Mukherjee, 2008. "Sustaining implicit contracts when agents have career concerns: the role of information disclosure," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 469-490, June.
    4. Bengt Holmström, 1999. "Managerial Incentive Problems: A Dynamic Perspective," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 169-182.
    5. Bengt Holmström, 1999. "Managerial Incentive Problems: A Dynamic Perspective," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 169-182.
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    More about this item

    Keywords

    education; signaling; career concerns;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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