A Signaling Theory of Education under the Presence of Career Concerns

Hwang, SunJoo

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A person’s life consists of two important stages: the first stage as a

student and the second stage as a worker. In an integrated model of

education and career concerns, I analyze the welfare effects of

education. In Spence’s job market signaling model, education as a

sorting device improves efficiency by mitigating the lemon market

problem. In contrast, in the integrated model, education as a sorting

device can be detrimental to social welfare, as it eliminates work

incentives generated by career concerns.

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