An Economic Analysis Of Educational Signaling

Under the influence of the theory of human capital investment and higher education for the masses development, the education industry has showed a prosperously developing trend in the whole world. People are enjoying the benefit of economic development brought out by education. However, the diploma disease can be seen anywhere in the labor market at the same time. Thus, the economic practice is calling for the birth of the theory of educational signaling.The article studies the university students employment market in China on the basis of the problematic reality"graduation equals unemployment". It takes the educational signals as economic analytical factors embedded in the labor market with the assumption that the educational signaling costs have a negative correlation with the productive ability, so as to probe the relationship between education and labor market with asymmetrical information and diagnose the defects in the development of higher education, in order to establish a theory system of educational signaling economics.The educational signaling economics is a theory about the optimum choice and incentive mechanism design under uncertainty. On the basis of the theories concerning educational signaling, I analyze the rational decision behaviors of the agents who invest in education and compete in the educational diploma market in the pursuit of obtaining the return on education with the instrument of cost-return analysis. I attach much importance to the effects of educational signals on both the separate equilibrium and the pooling equilibrium in the operation of market transmission, market screening and market measuring mechanisms. I also explain both the economic and social values of the educational diploma signals and verify the strong screening effects of the CET-4 and CET-6 certificates, a most authoritative certificate tested by the market practice, with the help of auction theory and the efficiency wages theory as ways to screen job hunters with different ability. The adoption of the educational signals market screening theory system not only gives a resolution to the problem of bilateral choices between the job suppliers and the job applicants resulting from the asymmetrical information, but also enhances the match efficiency of human resources so as to make them exert themselves in the appropriate positions. The article explains both parties'decision behaviors in the job market by the eatablishment of job applicants'and suppliers'rational choice models. It discusses the market effects of educational signals by analysing the enlargement of the educational diploma market and the competition and distortion of the educational diploma signals.Finally, on the basis of rational neditation on the higher education development in China, I suggest that the universities and colleges try their best to signal diploma signals with professional characteristics so that the participants in the labort market can receive and screen them clearly. They should take into consideration the educational quality, the diploma signals management and positioning of the students according to their own resources endowment and relative advantages when they signal higher education diploma signals. On the one hand, they should raise the educational quality; on the other hand, they should set up the brand of higher education diploma. In a word, they should"produce"graduates with high quality and transmit the best education diploma signals to the labor market. Only by this can higher education be on the road toward market, world and future in China.