Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/272731 
Authors: 
Year of Publication: 
2023
Series/Report no.: 
IZA Discussion Papers No. 16104
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
A pre-condition for employer learning is that signals at labor market entry do not fully reveal graduates' productivity. I model various distinct sources of signal imperfection—such as noise and multi-dimensional types—and characterize their implications for the private return to skill acquisition. Structural estimates using NLSY data suggest an important role for noise, pushing the private return below the social return. This induces substantial under-investment and causes output losses of up to 22 percent. Value-added-based evidence from Swedish high school graduates also points to noise and under-investment. Highlighting the distinction between schooling duration and skills acquired, I conclude that individuals likely spend too much time in school, but learn too little.
Subjects: 
human capital
signaling
employer learning
returns to schooling
JEL: 
D82
I26
J24
J31
Document Type: 
Working Paper

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