A Spillover-Based Theory of Credentialism

29 Pages Posted: 7 Mar 2010

See all articles by Chris Bidner

Chris Bidner

University of New South Wales (UNSW)

Date Written: March 6, 2010

Abstract

I propose a model in which credentials, such as diplomas, are intrinsically valuable; a situation described as credentialism. The model overcomes an important criticism of signalling models by mechanically tying a worker’s wages to their productivity. A worker’s productivity is influenced by the skills of their coworkers, where such skills arise from an ability-augmenting investment that is made prior to matching with coworkers. A worker’s credentials allow them to demonstrate their investment to the labor market, thereby allowing workers to match with high-skill coworkers in equilibrium. Despite the positive externality associated with a worker’s investment, I show how over-investment is pervasive in equilibrium.

Keywords: Credentialism, Matching, Spillovers, Signaling

JEL Classification: D80, I20, J24, C78

Suggested Citation

Bidner, Chris, A Spillover-Based Theory of Credentialism (March 6, 2010). UNSW Australian School of Business Research Paper No. 2010 ECON 10, Available at SSRN: https://ssrn.com/abstract=1566126

Chris Bidner (Contact Author)

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
157
Abstract Views
1,054
Rank
339,776
PlumX Metrics