The speed of employer learning and job market signalling revisited

Abstract

This article discusses the claim made by Altonji and Pierret (AP) (1997) and Lange (2007) that a high Speed of Employer Learning (SEL) indicates a low value of Job Market Signalling (JMS). It is first discussed intuitively in the light of Spence's original model and then evaluated in a simple extension of a model developed by AP (1997). The analysis provided indicates that, if Employer Learning (EL) is incomplete, a high SEL is not necessarily indicative of a low value of JMS.

Acknowledgement

I would like to thank Fabian Lange. All the remaining errors in this article are mine.

Notes

¹I assume that some workers acquire the wrong level of education (either because they do not know their type with certainty or because they are cheating), so that employers need to learn about workers after hiring.

²It is assumed that the individual chooses either 0 or S years of schooling.