Volume 29, Number 1 (Winter) 1994
Kroch, Eugene A., and Kriss Sjoblom. 1994. "Schooling as Human Capital or a Signal: Some Evidence." Journal of Human Resources 29(1):156-180.
A new way is proposed to distinguish between the human capital and the signaling theories of the value of education. If education is a signal, then the essence of the signal should be distilled in the position of an individual in the distribution of education for his cohort. Estimating earnings equations that include both absolute (years) and relative (percentile) measures of education provides a test of the two competing theories. Analyzing two separate panel data sources under a range of alternating specifications, we find that the years measure of schooling has a consistently significant positive effect on earnings, but that the rank measure rarely does. This evidence supports the conclusion that human capital rather than signaling is the predominant explanation of schooling's value.
Eugene A. Kroch is an assistant professor of economics at Villanova University, and Kriss Sjoblom is a Trustee of Bobby's Fund Foundation. The authors would like to thank Paul Taubman, Jere Behrman, and other members of the Labor and Household Workshop at the University of Pennsylvania, as well as a number of anonymous referees. They also received support from the Center for the Study of Organizational Innovation at the University of Pennsylvania. The data used in this article can be obtained beginning in August 1994, through August 1997, from Eugene Kroch at the following address: Department of Economics, Villanova University, Villanova, PA 19085.
© 2002 by the Board of Regents of the University of Wisconsin System
US ISSN 0022-166X