TY  - JOUR
AU  - Altonji,Joseph G.
AU  - Pierret,Charles R.
TI  - Employer Learning and the Signaling Value of Education
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5438
PY  - 1996
Y2  - January 1996
UR  - http://www.nber.org/papers/w5438
L1  - http://www.nber.org/papers/w5438.pdf
N1  - Author contact info:
Joseph G. Altonji
Department of Economics
Yale University
Box 208264
New Haven, CT  06520-8264
Tel: 203/432-6285
Fax: 203/432-5591
E-Mail: joseph.altonji@yale.edu

Charles R. Pierret
AB  - 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 'statistically discriminate' among workers.  The pure credential value of education will depend on how quickly firms learn.  To obtain information on employer learning, we work with a wage equation that contains both 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 provides information about the rate at which employers learn about worker productivity.  Using data from the NLSY we obtain preliminary estimates of the rate at which employers learn about worker quality and use these, along with some strong auxiliary assumptions, to explore the empirical relevance of the educational screening hypothesis.  We show that even if employers learn relatively slowly about the productivity of new workers, the portion of the return to education that could reflect signaling of ability is limited.
ER  -