ERIC Number: ED414491
Record Type: Non-Journal
Publication Date: 1997-Nov
Reference Count: N/A
Employer Learning and the Signaling Value of Education. National Longitudinal Surveys Discussion Paper.
Altonji, Joseph G.; Pierret, Charles R.
A statistical analysis was performed to test the hypothesis that, if profit-maximizing firms have limited information about the general productivity of new workers, they may choose to use easily observable characteristics such as years of education to discriminate statistically among workers. Information about employer learning was obtained by working with a wage equation containing terms designating two interactions: the interaction between experience and a hard-to-observe variable that is positively related to productivity and the interaction between experience and a variable that firms can easily observe, such as years of education. The time path of the coefficient on the unobservable productivity variable provided information about the rate at which employers learn about worker productivity. Data from the National Longitudinal Survey of Youth were used to obtain preliminary estimates of the rate at which employers learn about worker quality. The estimates were used together with several auxiliary assumptions to calculate what the internal rate of return to education would be if education has no direct effect on productivity. The analysis demonstrated that, even if employers learn about new workers' productivity relatively slowly, the portion of the return to education that could reflect signaling of ability is limited. (Contains 32 references.) (MN)
Publication Type: Reports - Research
Education Level: N/A
Authoring Institution: Bureau of Labor Statistics, Washington, DC.; National Science Foundation, Arlington, VA. Directorate for Computer and Information Science and Engineering.
Identifiers - Assessments and Surveys: National Longitudinal Survey of Youth; Armed Forces Qualification Test