The Importance of Signalling in Job Placement and Promotion

by Andrew Heisz and Philip Oreopoulos
Business and Labour Market Analysis Division
Analytical Studies Branch research paper series, No. 236

Context

In a setting where training or promotion opportunity depend on expected initial ability, the effects of signalling initial skills on wages may last well beyond the period when knowledge of a workers' skill set is fully known.

Objective

This paper proposes extending recent tests for signalling to better accommodate training differences by using firm-level characteristics and applying these tests to a large sample of MBA and law graduates from different ranked schools.

Findings

The paper finds that if training is greater at firms that hire workers with better expected-ability, earnings adjustments after controlling for initial firm should be correlated with new information about productivity, but not with initial signals of productivity.

Data Source: The data are constructed from the T1 Family File, the University Student Information System, the Longitudinal Employment Analysis Program Database and School ranking data (average Graduate Management Admissions Test (GMAT) and Law School Admission Test (LSAT) percentile scores to rank business and law schools).

View the full publication.

---

You need to use the free Adobe Reader to view PDF documents. To view (open) these files, simply click on the link. To download (save) them, right-click on the link. Note that if you are using Internet Explorer or AOL, PDF documents sometimes do not open properly. See Troubleshooting PDFs. PDF documents may not be accessible by some devices. For more information, visit the Adobe website or contact us for assistance.