How is the signalling theory of education related to other theories that explain the determinants of wages
A)It contrasts with efficiency-wage theories.
B)It closely parallels efficiency-wage theories.
C)It contrasts with the human-capital theory.
D)It closely parallels the human-capital theory.

Question

Quizplus · Accepted Answer

The signalling theory of education contrasts with the human-capital theory, which suggests that individuals earn higher wages due to their increased skills and knowledge acquired through education and training. The signalling theory, on the other hand, suggests that education serves as a signal of an individual’s innate abilities and attributes, rather than acquiring new skills or knowledge. It is different from efficiency-wage theories, which focus on employer behavior in setting wages to motivate workers to be productive.

How Is the Signalling Theory of Education Related to Other