Technological Progress and Self-Reinforcing Degree Inflation in the Canadian Labor Market

31 Pages Posted: 16 Jun 2014 Last revised: 17 Jun 2018

See all articles by Seung-Gyu Sim

Seung-Gyu Sim

Aoyama Gakuin University

Mai Seki

Ritsumeikan University

Date Written: June 10, 2018

Abstract

By developing a job search model with college degree as a noisy signal, this paper analyzes the underlying mechanism of a 'degree-inflation,' measured by the proportion of a highly educated workforce performing unskilled tasks (i.e., cross-skill matches). Skilled workers can perform either skilled, or unskilled, tasks depending on their qualification, while unskilled workers can perform unskilled tasks only. Upon a technological progress, the ex post task assignment increases the lottery values of ex ante skilled workforce and vacancies over unskilled counterparts, which triggers the vicious cycle of degree inflation. The quantitative analysis using the Canadian data indicates that degree inflation has eroded a substantial portion of potential welfare gains from the recent technological progress. Furthermore, we compare two potential policy remedies, reduction of college tuition and improvements of college education quality.

Keywords: Degree Inflation, Cross-skill Match, Crowd-out Effect

JEL Classification: I25, J31, J64, O41

Suggested Citation

Sim, Seung-Gyu and Seki, Mai, Technological Progress and Self-Reinforcing Degree Inflation in the Canadian Labor Market (June 10, 2018). Available at SSRN: https://ssrn.com/abstract=2450828 or http://dx.doi.org/10.2139/ssrn.2450828

Seung-Gyu Sim

Aoyama Gakuin University ( email )

4-4-25 Shibuya, Shibuya-ku
Tokyo, 150-8366
Japan

Mai Seki (Contact Author)

Ritsumeikan University ( email )

1-1-1 Nojihigashi
Kusatsu, Shiga 5250058
Japan
6137827045 (Phone)

HOME PAGE: http://https://sites.google.com/site/maisekiuw/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
298
Abstract Views
2,394
rank
125,824
PlumX Metrics