The More Abstract the Better? Raising Education Cost for the Less Able when Education is a Signal

Tim Perri

No 13-08, Working Papers from Department of Economics, Appalachian State University

Abstract: More able individuals may over-investment in education when education signals ability. If education directly increases productivity, increasing education cost for the less able may increase welfare by reducing over-investment by the more able, but will not do so if such cost is already either too small or too large because no over-investment then occurs. Increasing cost for the less able is most likely to increase welfare when education is relatively unproductive compared to the initial ability difference between more and less able individuals. Our results have implications for online education which may lower cost relatively more for the less able. Key Words: Signaling, pooling, and education cost

JEL-codes: D82 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-cta and nep-edu
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