Signaling and Opitmal Sorting

Tim Perri

No 16-07, Working Papers from Department of Economics, Appalachian State University

Abstract: I consider education as a discrete signal of inherent ability. More able individuals are more productive in the primary sector, and less able individuals are more productive in the secondary sector. If, absent signaling, all would be in the secondary sector, signaling increases but never maximizes welfare. When all would be in the primary sector without signaling, signaling may increase welfare. Interestingly, signaling is more likely to increase welfare the greater is productivity in the secondary sector, and, possibly, the lower is productivity in the primary sector. Excessive signaling occurs by less able individuals, which is consistent with recent increased undergraduate enrollment in the U.S. If education increases human capital, total welfare likely increases. However, unless all invest in education, the more human capital is increased by education, the greater the number of individuals who over-invest in education. Key Words: Signaling, Sorting

JEL-codes: D82 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://econ.appstate.edu/RePEc/pdf/wp1607.pdf (application/pdf)

Related works:
Journal Article: Signaling and optimal sorting (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:apl:wpaper:16-07

Access Statistics for this paper

More papers in Working Papers from Department of Economics, Appalachian State University Contact information at EDIRC.
Bibliographic data for series maintained by O. Ashton Morgan ().