We provide evidence that college graduation plays a direct role in revealing ability to the labor market. Using the NLSY79, our results suggest that ability is observed nearly perfectly for college graduates, but is revealed to the labor market more gradually for high school graduates. Consequently, from the beginning of their careers, college graduates are paid in accordance with their own ability, while the wages of high school graduates are initially unrelated to
their own ability. This view of ability revelation in the labor market has considerable power in explaining racial differences in wages, education, and returns to ability. (JEL D82, I21, I23, J24, J31)
Arcidiacono, Peter, Patrick Bayer, and Aurel Hizmo.
"Beyond Signaling and Human Capital: Education and the Revelation of Ability."
American Economic Journal: Applied Economics,
Asymmetric and Private Information
Analysis of Education
Higher Education and Research Institutions
Human Capital; Skills; Occupational Choice; Labor Productivity
Wage Level and Structure; Wage Differentials