Of the theories listed below, which do the best job of explaining why educated people are paid more than uneducated people?
A)human-capital and price-fixing
B)human-capital and signaling
C)wage-differential and signaling
D)wage-differential and compensating-differentials

Question

Quizplus · Accepted Answer

The human-capital theory suggests that education and training increase an individual's productivity, leading to higher wages. However, the signaling theory argues that education serves as a signal to employers of an individual's abilities and characteristics, leading to higher wages even if the education itself does not directly increase productivity. The combination of both theories suggests that education both increases productivity and serves as a signal to employers, explaining why educated people are paid more than uneducated people.

Of the Theories Listed Below, Which Do the Best Job