Signaling and optimal sorting

Signaling and optimal sorting JEcon https://doi.org/10.1007/s00712-018-0618-0 Timothy Perri Received: 17 January 2017 / Accepted: 30 May 2018 © Springer-Verlag GmbH Austria, part of Springer Nature 2018 Abstract I consider educational signaling of inherent ability that facilitates sorting of individuals between sectors. More able individuals are more productive in the primary sector, and less able individuals are more productive in the secondary sector. I find signaling may increase but never maximizes welfare, and is more likely to increase welfare the greater is productivity in the secondary sector, and, possibly, the lower is productivity in the primary sector. Consistent with recent increased undergraduate enrollment in the U.S, excessive signaling occurs by less able individuals. If education increases human capital, total welfare likely increases although more individuals may over-invest in education. Keywords Signaling · Sorting · welfare JEL Classification D82 1 Introduction Scholars and pundits continue to debate whether education increases productivity (Leonhardt 2011). In a study for the Social Science Research Council, Arum et al. (2011) find that 36% of U.S. college students learn very little after 4 years. One economist (Caplan 2011) recently argued that little is learned in college, higher edu- B Timothy Perri perritj@gmail.com Department of Economics, Appalachian State University, Boone, NC http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economics Springer Journals

Signaling and optimal sorting

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Publisher
Springer Journals
Copyright
Copyright © 2018 by Springer-Verlag GmbH Austria, part of Springer Nature
Subject
Economics; Economics, general; Economic Theory/Quantitative Economics/Mathematical Methods; Microeconomics; Macroeconomics/Monetary Economics//Financial Economics; Public Finance; Game Theory, Economics, Social and Behav. Sciences
ISSN
0931-8658
eISSN
1617-7134
D.O.I.
10.1007/s00712-018-0618-0
Publisher site
See Article on Publisher Site

Abstract

JEcon https://doi.org/10.1007/s00712-018-0618-0 Timothy Perri Received: 17 January 2017 / Accepted: 30 May 2018 © Springer-Verlag GmbH Austria, part of Springer Nature 2018 Abstract I consider educational signaling of inherent ability that facilitates sorting of individuals between sectors. More able individuals are more productive in the primary sector, and less able individuals are more productive in the secondary sector. I find signaling may increase but never maximizes welfare, and is more likely to increase welfare the greater is productivity in the secondary sector, and, possibly, the lower is productivity in the primary sector. Consistent with recent increased undergraduate enrollment in the U.S, excessive signaling occurs by less able individuals. If education increases human capital, total welfare likely increases although more individuals may over-invest in education. Keywords Signaling · Sorting · welfare JEL Classification D82 1 Introduction Scholars and pundits continue to debate whether education increases productivity (Leonhardt 2011). In a study for the Social Science Research Council, Arum et al. (2011) find that 36% of U.S. college students learn very little after 4 years. One economist (Caplan 2011) recently argued that little is learned in college, higher edu- B Timothy Perri perritj@gmail.com Department of Economics, Appalachian State University, Boone, NC

Journal

Journal of Economics – Springer Journals

Published: Jun 6, 2018

References

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