Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/173033 
Authors: 
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper No. 6757
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Several recent papers employ the regression discontinuity design (RDD) to estimate the causal effect of a diploma (or similar credentials) on wages. Using a simple model of asymmetric information, I show that RDD estimates the information value of a diploma. A positive information value arises if employers, unable to observe the test score that determines diploma receipt, infer that workers with a diploma have higher average productivity than those without. Crucially, a diploma can have information value regardless of whether workers’ productivity is solely determined by acquisition of knowledge and skills through studying (the pure human capital model) or whether studying has no effect on productivity (the pure signaling model). Thus, while RDD estimates of diploma effects are evidence for information frictions and statistical discrimination, they do not help to distinguish between human capital and signaling. However, with longitudinal data, RDD can be used to estimate the speed of employer learning, since RDD coefficients are direct estimates of (differences in) expectation errors.
Subjects: 
human capital
signaling
employer learning
statistical discrimination
regression discontinuity design
JEL: 
C20
D80
J20
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.