Skill Premium, College Enrollment and Education Signals
نویسندگان
چکیده
This paper asks if "higher education as a signal" helps explaining the comovements between college enrollment rate and skill premium for younger workers in the US from 1973 to 2005. In my model a continuum of agents, heterogeneous in talent and initial wealth, make schooling and working decisions: work now or take up college first? When college is very expensive only the wealthy can afford it, hence the degree does not signal much as far as talent is concerned. When college becomes more affordable the degree is a better signal of talent. If talent is valuable, per se, on the work place, the college premium should increase. The model is calibrated to match the basic observed moments of college enrollment and skill premium. For a certain class of production functions it can potentially generate almost all of the growth in college premium after 1985.
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