NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Aurel Hizmo

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April 2008Beyond Signaling and Human Capital: Education and the Revelation of Ability
with Peter Arcidiacono, Patrick Bayer: w13951
In traditional signaling models, education provides a way for individuals to sort themselves by ability. Employers in turn use education to statistically discriminate, paying wages that reflect the average productivity of workers with the same given level of education. In this paper, we provide evidence that education (specifically, attending college) plays a much more direct role in revealing ability to the labor market. We use the NLSY79 to examine returns to ability early in careers; our results suggest that ability is observed nearly perfectly for college graduates but is revealed to the labor market much more gradually for high school graduates. As a result, from very beginning of the career, college graduates are paid in accordance with their own ability, while the wages of high ...

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