A Spillover-Based Theory of Credentialism

Chris Bidner

No 2010-10, Discussion Papers from School of Economics, The University of New South Wales

Abstract: I propose a model in which credentials, such as diplomas, are intrinsically valuable; a situation described as credentialism. The model overcomes an important criticism of signalling models by mechanically tying a worker’s wages to their productivity. A worker’s productivity is influenced by the skills of their coworkers, where such skills arise from an ability-augmenting investment that is made prior to matching with coworkers. A worker’s credentials allow them to demonstrate their investment to the labor market, thereby allowing workers to match with high-skill coworkers in equilibrium. Despite the positive externality associated with a worker’s investment, I show how over-investment is pervasive in equilibrium.

Keywords: Credentialism; Matching; Spillovers; Signaling (search for similar items in EconPapers)
JEL-codes: C78 D80 I20 J24 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2010-05
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: A spillover-based theory of credentialism (2014)
Journal Article: A spillover‐based theory of credentialism (2014)
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