Diploma as signal? Estimating sheepskin effects in the Philippines
The screening theory of education argues that education does not necessarily enhance worker’s productivity, but serves only as a signal of worker’s pre-existing ability. Empirical studies found that the mere possession of a diploma increases wages disproportionately than without it, or the so-called sheepskin effects. Using a sample of urban non-agricultural wage workers in the Philippines, this paper finds substantial sheepskin effects for holding a tertiary diploma, even after controlling for individual heterogeneity. While returns to tertiary education are lower in the competitive (private) sector, there is evidence of diverging age-earnings profiles between tertiary and secondary graduates, indicating a productive value higher education.
Olfindo, R. (2018). Diploma as Signal? Estimating Sheepskin Effects in the Philippines. International Journal of Educational Development, 60, 113–119. https://doi.org/10.1016/j.ijedudev.2017.11.001