Employer Learning and the Signalling Value of Education

Joseph Altonji and Charles R. Pierret

Chapter 8 in Internal Labour Markets, Incentives and Employment, 1998, pp 159-195 from Palgrave Macmillan

Abstract: Abstract If firms have limited information about productivity or the personal attributes that determine productivity (such as knowledge, aptitude, and motivation), they will have an incentive to ‘statistically discriminate’ among young workers on the basis of easily observable variables that are correlated with productivity, such as education.1 By the same token, the signalling value of education is likely to be an important part of the return to education only to the extent that firms lack good information about the productivity of new workers and learn slowly over time. In this chapter, we provide some preliminary evidence on how much firms know about new workers and how quickly they learn over time and then use this information to address the issue of how much of the return to education could be due to signalling rather than to the direct effect of education on productivity.

Keywords: Instrumental Variable; Potential Experience; Wage Equation; Statistical Discrimination; Fourth Order Polynomial (search for similar items in EconPapers)
Date: 1998
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Working Paper: Employer Learning and the Signaling Value of Education (1996)
Working Paper: Employer Learning and the Signaling Value of Education
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DOI: 10.1057/9780230377974_8

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