 Investment in early education and job market signalingLuigi Brighi () and Marcello D'Amato Department of Economics (DEMB) from University of Modena and Reggio Emilia, Department of Economics "Marco Biagi" Abstract: We consider a signaling model of the job market in which workers, before choosing their level of education, have the opportunity to undertake an unobservable investment in activities aimed at saving on future education costs. Sufficiently high levels of investments allow a low productivity worker to cut the marginal costs of signaling below the high productivity worker’s. In contrast to standard results, we find that the equilibrium outcome will depend on the relative magnitude of workers’ average productivity. If average productivity exceeds a certain threshold the most plausible solution is a refined pooling equilibrium in which all workers attain the same level of over-education and are paid the same wage. Otherwise, the most plausible outcome is the standard least cost separating equilibrium in which only high ability workers are over-educated Keywords: : Signaling; Pooling Equilibrium; Single Crossing; Early Education (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mod:dembwp:0179 Access Statistics for this paper More papers in Department of Economics (DEMB) from University of Modena and Reggio Emilia, Department of Economics "Marco Biagi" Contact information at EDIRC. |
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