Education, Signaling, and Wage Inequality in a Dynamic Economy

Kazuhiro Yuki

MPRA Paper from University Library of Munich, Germany

Abstract: Many empirical works suggest that education has a positive effect on earnings not only because it raises human capital but also because it functions as a signal when employers have incomplete information on employees' skills. The signaling role could have important consequences on the dynamics of education, wages, and wage distribution when there exist intergenerational linkages in educational decisions. This paper examines the dynamic effects in an economy where education has the dual roles and some fraction of individuals is credit constrained from taking education. In particular, it investigates how the number of educated individuals, the importance of the signaling value of education, and the wage inequality between educated and uneducated workers change over time in such economy, and compares the dynamics with those when education does not function as a signal. It also examines whether the signaling role leads to higher aggregate consumption or not in the long run.

Keywords: Human capital; Education; Signaling; Statistical discrimination; Credit constraint (search for similar items in EconPapers)
JEL-codes: I20 J24 O11 O15 (search for similar items in EconPapers)
Date: 2009-07
New Economics Papers: this item is included in nep-cta, nep-edu, nep-hrm and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:16982

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