A Signaling Theory of Education under the Presence of Career Concerns
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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