A Signaling Theory of Education Under the Presence of Career Concerns
KDI Journal of Economic Policy 2016, 38(2) 87-101
16 Pages Posted: 27 Jun 2016
Date Written: May 31, 2016
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.
Keywords: education, signaling, career concerns
JEL Classification: D86, G38
Suggested Citation: Suggested Citation