Education and Screening
Section I introduces the material. In section II a model is developed which explores the impact of input-quality uncertainty on factor demand from which is derived a rationale for the use of devices which segment the population into classes differing in their "skill" distribution parameters. The model, however, ignores the motivation of individuals to acquire the characteristics upon which firms screen, in particular, the greater incentive for the more productive to purchase the screen. This aspect has been explored by Spence (1973) and Stiglitz (1973) and will not be explicitly considered here. In section III the social value of schooling's informational context is derived within the preceeding framework. Section IV describes some empirical attempts to isolate the productivity and identification effects. The last section summarizes the paper.
I am greatly indebted to Finis Welch, Robert Willis, and James Smith for their comments. This research was in part funded through a grant to the National Bureau of Economic Research by the Rockefeller Foundation and through a Department of Labor, Manpower Administration pre-doctoral fellowship. (This paper is a slightly modified version of a December 1974 draft of this paper.)
American Economic Review, Vol. 67, no. 5 (1977): 949-958.