All of Scioteca
Communities & Collections By Issue Date Authors Titles Subjects Country / Region
Profiles
Our Authors
My Account
Login

Education, Signaling and Mismatch

We assess the importance education as a signal of workers skills and the e¤ects of poor signaling quality on labor market outcomes. We do so by merging a frictional labor market model with a signaling setup where there is a privately observed idiosyncratic component in the cost of education. Given that highly skilled workers cannot correctly signal their abilities, their wages will be lower and they will not be matched to the "right" vacancies, or may be unemployed. Skilled workers will then have lower incentives to move to high productivity markets. Furthermore, fewer vacancies will be created in labor markets where skills matter, and incentives for workers to invest in education will be lower. Overall, an economy where education is a noisier signal generates lower educational attainment, higher unemployment and lower productivity. In addition, we provide evidence suggesting that education plays a poor signaling role in Latin American countries. We then calibrate our model using Peruvian data, and through a quantitative exercise we show that this mechanism could be relevant to explain the relatively bad performance of labor markets in Latin American countries.

Abstract

Description

Subject

Educación | Economía | Trabajo y protección social | Investigación socioeconómica

País / Región

América Latina y el Caribe
Perú

URI

https://scioteca.caf.com/handle/123456789/916

Date

2016-06

Cite from this publication

Collections

6.1 Documentos de trabajo en investigación socioeconómica

Endorsement

Review

Supplemented By

Referenced By

Creative Commons license

CC-BY-NC
Except where otherwised noted, this item's license is described as CC-BY-NC
Thumbnail Image

Files

paperMismatch6.pdf (482.27 KB)

Authors

Journal Title

Journal ISSN

Volume Title

Publisher

CAF

Related Items

Thumbnail Image
Education, signaling and the allocation of entrepreneurial skills

We assess the allocative importance of education when workers can choose to self-employ. To do so, we build a model combining educational choices with the...

Thumbnail Image
Financial Technologies, Labor Markets, and Informality: Evidence from Instant Payment Systems

While technological innovations typically increase wage inequality by favoring skilled workers, we show that instant payment systems instead reduce it. We study the labor market...

Thumbnail Image
Predicting Individual Wellbeing Through Test Scores: Evidence from a National Assessment in Mexico

We construct two longitudinal datasets that record students’ test scores in a national standardized exam in Mexico and track students from the end of primary...

Thumbnail Image
Human Capital and Financial Development: Firm-Level Interactions and Macroeconomic Implications

Capital-skill complementarity in production implies non-trivial interactions between availability of human capital and financial constraints. Firms that are constrained in their access to finance hire...

Thumbnail Image
A Taxonomy of Colombia’s Informal Labor Market

A taxonomy of the informal labor market is extremely important to understand and handle informality, particularly in a country as Colombia where this phenomenon is...

Thumbnail Image
Women, Motherhood, and Structural Transformation. Insights from Rural Latin America

Structural transformation—the shift from agriculture to industry and services—is key to economic development and can reshape labor market gender gaps. Yet little is known about...