CHOOSING A FIELD OF EDUCATION: SIGNALING, MISMATCH, AND EQUILIBRIUM SHIFTING
CHOOSING A FIELD OF EDUCATION: SIGNALING, MISMATCH, AND EQUILIBRIUM SHIFTING

Summary/Abstract: In this paper the author reviews a well-known model of job market signaling through education, extending it to a choice of a field of study. In the theoretical part, she extends the classic model, by analyzing a game of education choice with continuum types of agents and discrete space of efforts, which is here interpreted as a field of study at the university level. In the second part, the author provides a simple numerical exercise to show how policy changes may influence the equilibrium. This exercise is used in the context of ob- served overeducation in the Polish labor market. Given the data on recent alumni’s field of study and professional career, the author calibrates a stylized disutility function that would rationalize the choices within a signaling model with inelastic demand and some unobserved frictions. Then, she provides a simple illustrative argument on how an inter- vention by a better-informed social planner may shift the equilibrium. The author argues that overeducation may arise if the cost of getting a diploma is too small; this can lead to an over-supply of university graduates as compared with the labor market demand.

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