Specialized or Generalized Education Systems?

When does a specialized rather than a general education system result in superior labour market outcomes? This question is analyzed in an economy in which individuals differ in two ways: innate talent and how well informed they are about that talent. Some learn early on about which careers they are suited to while others become informed about their talents later in life. Firms value productivity, which is a function of raw talent and education. Well-designed education systems trade off the desire to capitalize on raw talent through specialization with the need to provide individuals with opportunities to learn about their career preferences through a broad education. Our main finding is that in a population where individuals have different talents and information regarding career suitability, education systems focused on providing a broad education can outperform those that specialize.