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JOB SIGNALLING and WELFARE IMPROVING MINIMUM WAGE LAWS
Author(s) -
West Edwin G.
Publication year - 1988
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1988.tb01513.x
Subject(s) - suspect , economics , signalling , wage , welfare , labour economics , marginal cost , microeconomics , marginal utility , public economics , law , market economy , political science
Job market signalling (via education) models assume workers know their marginal productivities before accepting jobs, but employers do not. Yet modern theories of the firm predict positive cross partial derivatives among factors. Factor owners thus cannot know their marginal products before interacting with others. Any empirical claim that education is being used for socially wasteful signalling is therefore suspect. Exceptional but underpaid workers can in any case shirk down to the common level instead of obtaining education. The recent finding that minimum wage laws could curb wasteful signalling might thus be a solution in search of a problem.