Job Market Signaling Michael Spence The Quarterly Journal of Economics, Vol. 87, No. 3. (Aug., 1973), pp. 355-374. Stable URL: http://links.jstor.org/sici?sici=0033-5533%28197308%2987%3A3%3C355%3AJMS%3E2.0.CO%3B2-3 The Quarterly Journal of Economics is currently published by The MIT Press.
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http://www.jstor.org Thu Apr 3 07:17:58 2008
JOB MARKET SIGNALING *
1. Introduction, 355. - 2. Hiring as investment under uncertainty, 356. 3. Applicant signaling, 358. -4. Informational feedback and the definition of equilibrium, 359. - 5. Properties of informational equilibria: an example, 361. - 6. The informational impact of indices, 368. - Conclusions, 374.
The term "market signaling" is not exactly a part of the welldefined, technical vocabulary of the economist. As a part of the preamble, therefore, I feel I owe the reader a word of explanation about the title. I find it difficult, however, to give a coherent and comprehensive explanation of the meaning of the term abstracted from the contents of the essay. I n fact, it is part of my purpose to outline a model in which signaling is implicitly defined and to explain why one can, and perhaps should, be interested in it. One might accurately characterize my problem as a signaling one, and that of the reader, who is faced with an investment decision under uncertainty, as that of interpreting signals. How the reader interprets my report of the content of this essay will depend upon his expectation concerning my stay in the market. If one believes I will be in the essay market repeatedly, then both the reader and I will contemplate the possibility that I might invest in my future ability to communicate by accurately reporting the content of this essay now. On the other hand, if I am to be in the market only once, or relatively infrequently, then the above-mentioned possibility deserves a low probability. This essay is about markets in which signaling takes place and in which the primary signalers are relatively numerous and in the market sufficiently infrequently that they are not expected to (and therefore do not) invest in acquiring signaling reputations. * T h e essay is based on the author's doctoral dissertation ("Market Signalling: The Informational Structure of Job Markets and Related Phenomcna," Ph.D. thesis, Harvard University, 1972), forthcoming as a book entitled Market Signaling: Information Transfer i n Hiring and Related Screening Processes in the Harvard Economic Studies Series, Harvard University Press. The aim here is to present the outline of the signaling model and some of its conclusions. Generalizations of the numerical examples used for expositional purposes here are found in ibid. and elsewhere. I owe many people thanks for help in the course of...
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