Wednesday, April 25, 2012

Education as Job Signaling

In Principles of Microeconomics we look at labor markets and discuss how a college degree can be used by inexperienced workers as a signalling device to employers of a set of skills/knowledge that employers value but cannot observe in - typically - inexperienced workers; a concept pioneered by Nobel Laurette Michael Spence. The New York Times reported that now the education signalling device may now be the Master's degree, not the undergraduate degree.

In my opinion, this might be a result of grade inflation. If all undergraduate candidates have high GPA's, then can a potential employer differentiate between two candidates?

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