Signaling and optimal sorting

Signaling and optimal sorting 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economics Springer Journals

Signaling and optimal sorting

Perri, Timothy
Journal of Economics, Volume 126 (2) – Jun 6, 2018
17 pages
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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
DOI
10.1007/s00712-018-0618-0
Publisher site
See Article on Publisher Site

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.

Journal

Journal of Economics – Springer Journals

Published: Jun 6, 2018

References

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