Human Capital and Signaling

… a core concept in Economic Analysis and Atlas102

Click for MRU video

Click for MRU video

Concept description

Alex Tabarrok (reference below, video on right) explores the relationship between Human Capital and earnings, including the Signaling effects of credentials such as a university degree, sometimes known as Sheepskin (or Credential) Effects.

Tabarrok shows that the returns to education measured as the ratio of lifetime earnings for university graduates relative to high school graduates.

Returns to EdTabarrok reviews the sheepskin effect and emphasizes the importance of actually finishing the course of studies to obtain the credential.

EdSignal

Practice questions

From http://www.mruniversity.com/node/301757, accessed 8 May 2016.

  1. The director of human resources at ToyCo is hiring new engineers. She’s got a stack of 250 applications, and she’s going to do a little research. She sits down and does a little cyber-snooping on all 250, and she finds the following (Word to the wise- prospective employers do cyber-snoop!): i. Of the 150 who have Facebook pages, 50 are holding a bottle of beer in their profile photo, and 100 aren’t. ii. Of the 100 who have their own websites, 20 have more than two typos. iii. Of the 150 who have Facebook pages, 25 have at least two friends who have apparently spent time in prison, according to a quick check of public records. Finding (ii) is likely to signal which of the following to the human resources director:

Source

Alex Tabarrok, Human Capital and Signaling (7-minute video), Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/human-capital-wages-education-globalization, accessed 8 May 2016.

Atlas topic and subject

Labour Markets, Transfers, and Personal Taxes (core topic) in Economic Analysis and Atlas102 Economic Analysis.

Page created by: Ian Clark, last modified on 19 May 2016.

Image: Alex Tabarrok, minute 0:15 in Human Capital and Signaling (7-minute video), Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/human-capital-wages-education-globalization, accessed 8 May 2016.