published as 'More Detail on the Pattern of Returns to Educational Signals' in: Southern Economic Journal, 2006, 73 (1), 125–135
This paper develops a multi-period model, in which workers are matched with jobs according
to imperfect educational signals and in which their subsequent productivities depend on both
their inherent ability and on the quality of the job match. It outlines a sequential process, in
which underpaid employees reveal their true productivities and overpaid employees are
detected by the firm until every match is perfect. The model produces a time path of the
returns to educational signals that is concave, a feature that earlier studies used to dismiss
educational signaling. Using a synthetic panel data set from the Current Population Survey
the theoretical result is then substantiated empirically. The paper contributes to the literature
by establishing the possibility of increasing returns to education over part of a workers life
within the signaling framework theoretically and empirically.
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