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Journal of Economics

, Volume 126, Issue 2, pp 135–151 | Cite as

Signaling and optimal sorting

  • Timothy PerriEmail author
Article
  • 44 Downloads

Abstract

I consider educational signaling of inherent ability that facilitates sorting of individuals between sectors. More able individuals are more productive in the primary sector, and less able individuals are more productive in the secondary sector. I find signaling may increase but never maximizes welfare, and is more likely to increase welfare the greater is productivity in the secondary sector, and, possibly, the lower is productivity in the primary sector. Consistent with recent increased undergraduate enrollment in the U.S, excessive signaling occurs by less able individuals. If education increases human capital, total welfare likely increases although more individuals may over-invest in education.

Keywords

Signaling Sorting welfare 

JEL Classification

D82 

Notes

Acknowledgements

I wish to thank the editor, Giacomo Corneo, and two anonymous referees for comments on previous versions of this paper.

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Copyright information

© Springer-Verlag GmbH Austria, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of EconomicsAppalachian State UniversityBooneUSA

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