Public information, education and welfare

  • Gianluca Femminis
  • Giulio PiccirilliEmail author
Original Paper


We study investments in education made by a continuum of individuals under imperfect information on returns. In the model, the wage accruing to single units of human capital is bargained in the labour market. In addition, this wage depends positively on a stochastic fundamental and, negatively, on the aggregate supply of human capital. At the time of investment, any agent observes a public and a private signal of the fundamental. We show that an increase in the precision of the public signal has an ambiguous impact on the expected social welfare. On the one hand, social welfare improves as schooling decisions become closer to those decisions that would be made under perfect information. On the other hand, social welfare deteriorates as externalities and coordination failures become more severe. The key result of our analysis is that an increase in the quality of public information turns out to be welfare improving, unless the distortions on the labour market are particularly strong.


Returns to education Occupational choice Information processing Bargaining 

JEL Classification

D62 D83 I26 J24 



We are grateful to two anonymous Referees and to the Associate Editor, Federico Revelli, for valuable comments and suggestions. A preliminary version of this contribution has been presented at the 18th International Conference on Computing in Economic and Finance: we thank the participants for helpful discussions. The research work leading to these results has received funding from the Catholic University of Milan (Grant D12018).


  1. Acemoglu, D. (1996). A microfoundation for social increasing returns in human capital accumulation. The Quarterly Journal of Economics, 111, 779–804.CrossRefGoogle Scholar
  2. Angeletos, G. M., Iovino, L., & La’O, J. (2016). Real rigidity, nominal rigidity, and the social value of information. American Economic Review, 106, 200–227.CrossRefGoogle Scholar
  3. Angeletos, G. M., & Pavan, A. (2007). Efficient use of information and social value of information. Econometrica, 75, 1103–1142.CrossRefGoogle Scholar
  4. Betts, J. R. (1996). What do students know about wages? Evidence from a survey of undergraduates. The Journal of Human Resources, 31, 27–56.CrossRefGoogle Scholar
  5. Blanchard, O., & Giavazzi, F. (2003). Macroeconomic effects of regulation and deregulation in goods and labor markets. The Quarterly Journal of Economics, 118, 879–907.CrossRefGoogle Scholar
  6. Brunello, G., Lucifora, C., & Winter-Ebmer, R. (2004). The wage expectations of European business and economics students. The Journal of Human Resources, 39, 1116–1142.CrossRefGoogle Scholar
  7. Colombo, L., & Femminis, G. (2008). The social value of public information with costly information acquisition. Economics Letters, 100, 196–199.CrossRefGoogle Scholar
  8. Colombo, L., Femminis, G., & Pavan, A. (2014). Information acquisition and welfare. Review of Economic Studies, 81, 1438–1483.CrossRefGoogle Scholar
  9. Dominitz, J., & Masky, C. F. (1996). Eliciting student expectations of the returns to schooling. The Journal of Human Resources, 31, 1–26.CrossRefGoogle Scholar
  10. EU Commission. (2016). A new skill agenda for Europe.
  11. EU Commission. (2017). EU skills panorama.
  12. Hellwig, C., & Veldkamp, L. (2009). Knowing what others know: Coordination motives in information acquisition. Review of Economic Studies, 76, 223–251.CrossRefGoogle Scholar
  13. Layard, R. G., Nickell, S. J., & Jackman, R. (1991). Unemployment: Macroeconomic performance and the labour market. Oxford: Oxford University Press.Google Scholar
  14. Llosa, L. G., & Venkateswaran, V. (2012). Efficiency under endogenous information choice. Mimeo: Pennsylvania State University.Google Scholar
  15. Mincer, J. (1974). Schooling, experience, and earnings. New York: Columbia University Press.Google Scholar
  16. Morris, S., & Shin, H. S. (2002). The social value of public information. American Economic Review, 92, 1521–1534.CrossRefGoogle Scholar
  17. Myatt, D. P., & Wallace, C. (2012). Endogenous information acquisition in coordination games. Review of Economic Studies, 79, 340–374.CrossRefGoogle Scholar
  18. Sims, C. A. (2006). Rational inattention: Beyond the linear-quadratic case. American Economic Review, 96, 158–163.CrossRefGoogle Scholar
  19. Wiswal, M., & Zafar, B. (2013). How do college students respond to public information about earnings? Mimeo.Google Scholar
  20. Wong, J. (2008). Information acquisition, dissemination, and transparency of monetary policy. Canadian Journal of Economics, 41, 46–79.CrossRefGoogle Scholar

Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  1. 1.Dipartimento di Economia e FinanzaUniversità Cattolica del S. CuoreMilanItaly
  2. 2.Universitas MercatorumRomeItaly

Personalised recommendations