Introduction
The theory of human capital holds that education directly augments individual productivity and therefore earnings. Human capital corresponds to any stock of knowledge or characteristics the worker has (either innate or acquired) that contributes to his or her productivity (Schultz 1961; Mincer 1974; Becker 1993). By forgoing current earnings and investing in education, individuals can improve the quality of their labor services in such a way as to raise their future market value. According to this view, human capital is akin to physical capital, the acquisition of which entails a present cost but a future benefit.
However, there is an alternative line of thought where education acts as signal for preexisting abilities and as a means to get the best jobs (Arrow 1973; Spence 1973; Stiglitz 1975). The terms signalling, screening, and sorting are often used interchangeably to describe variants of the same basic model. Higher levels of education are associated with higher...
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García-Aracil, A., Albert, C. (2018). Signalling and Credentialism, Higher Education. In: Encyclopedia of International Higher Education Systems and Institutions. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-9553-1_108-1
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