Education Signalling and the School-to-work Transition

Fernando Garcia-Belenguer Campos and Julian Moral Carcedo

No 2011/02, Working Papers in Economic Theory from Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History)

Abstract: This paper studies the relation between labour market institutions and educational systems and how this relation may affect youth unemployment rates. By constructing a signalling model in which education can be used as a signal of workers’ unobserved productivity and firms face firing costs, we investigate how the structure of the educational system and the labour market institutions may influence the school-to-work transition of young unexperienced workers. In particular, we find that different educational systems can lead to different youth unemployment rates, even for high-skilled individuals. Besides, the framework presented in this paper allows to understand how the existence of minimum wages affects individual’s education decision and helps to explain some of the observed empirical regularities.

Keywords: Educational systems; youth unemployment; minimum wages. (search for similar items in EconPapers)
JEL-codes: J39 J49 J64 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2011-03
New Economics Papers: this item is included in nep-edu and nep-lab
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