Economic Returns to Higher Education: Signaling v. Human Capital Theory; An Analysis of Competing Theories

This study, in concert with previous studies, attempts to separate out the independent effects of the signaling and human capital mechanisms, arguing that individuals utilize higher education to signal a broad set of inherent productivity enhancing characteristics, which are unobserved by employers. I argue that several past studies, namely Chevalier (2004), have focused too narrowly on measures of inherent intelligence as representative of an individual’s signaled productivity-enhancing characteristics and that estimates of the signaling effect might have been downwardly biased as a result