Educational signaling under different education systems.

Abstract

We consider a two-period signaling model in which an informed worker has to decide whether she invests in education or participates in the labor market in the first period. When the rate at which the cost of education decreases with the worker´s productivity is sufficiently high (low), the worker´s incentives to invest in education become stronger (weaker) when the worker is more patient, when future prospects in the labor market are better, or when the cost of education decreases. Those results are robust to the worker´s risk preferences and to the specification of the prior distribution function of worker´s productivities.