Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 6 The Economics of Labor Markets
Chapter 19 of 36 Earnings and Discrimination
Section 8 of 16
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According to the human capital theory view of education, schooling and training raises workers' wages because they become more productive.
Economists have proposed an alternative, signaling theory, which emphasizes firms use educational attainment to sort likely high-ability and low-ability workers.
According to this view, when people earn a college degree they do not necessarily become more productive because of the education itself but people do signal their potential higher productivity to prospective employers because it’s easier for higher-ability people to earn a college degree.
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In the similar advertising signaling theory the advertisement itself may contain no real information but the firm signals product quality to consumers by its willingness to spend on advertising.
In the education signaling theory schooling has limited real productivity benefit but the worker signals higher productivity to employers by willingness to spend money and years at school and completing the program.
According to both education and advertising signaling theory an action is taken not for its direct intrinsic benefit but because the willingness to take that action conveys general and indirect information to an observer.
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So, there are two views of education.
Human capital theory: Education directly increases a worker’s skills and productivity.
Signaling theory: Education does not necessarily make workers more productive, but finishing an education program signals natural ability, discipline, and potential productivity to employers.
The two views diverge when it comes to predicting the effects of policies that expand educational attainment:
Human capital view: If all workers attain more education, their productivity will rise, and so will their wages.
Signaling view: If education only acts as a signal, then raising everyone’s education levels will not increase productivity or wages overall — it will simply raise the standard of the “signal” required.
Both views help explain why workers with more education tend to earn higher wages than those with less.
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signaling theory
shigunaringu riron
シグナリング理論
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