The Expected (Signaling) Value of Higher Education

This paper explores students' expectations about the returns to completing higher education and provides first evidence on \textit{perceived} signaling and human capital effects. We elicit counterfactual labor market expectations for the hypothetical scenarios of leaving university with or without a degree certificate among a large and diverse sample of students at different stages of higher education. Our findings indicate substantial perceived returns to higher education. Moreover, by exploiting within-individual variation, we document sizeable expected labor market returns from signaling, whereas perceived productivity-enhancing (human capital) returns seem to be less pronounced. Over the expected course of career, we find lasting education premia as well as evidence consistent with employer learning.