Question

Spence’s original education signaling model has been criticized on the grounds that the presence or absence of a college degree is a relatively weak signal in today’s job market. That is, although the wage gap between those with and without degrees remains large, there appears to be considerable “pooling” of different levels of talent, ability, determination, work ethic, etc., within the group of college graduates. Consider a variation in the model in which firms use grade-point average (GPA) as the signal. No calculations are necessary for this problem.

(a) Explain how and why GPA might function as a better signal than simply earning a degree. Be specific.

(b) Identify and explain completely at least one weakness or deficiency in using GPA as a signal.

(c) Many colleges and universities have been accused of practicing grade inflation—defined as a gradual but steady increase in the average GPA of all graduates. What effect does this practice have on the signaling value of GPA?

(d) Considering your response to part (c), how do you predict High Ability and Low Ability students would react to grade inflation? Be specific.

(e) Some analysts argue that so-called educational signals are instead signals of relative wealth and privilege. How vulnerable is GPA to this criticism? How does it compare to other signals in the labor market?

Answer 1

(a) : - GPA in contrast with degree holding as the standards includes another degree of layering,it resembles picking best among the degree holders,now there is constantly a likelihood that you are searching for somebody serious and hard working,GPA could give that signaling,simply put it encourages you to limit and channel a great deal of decisions and along these lines give better flagging.

(b) : - One shortcoming with utilizing GPA as a sign is that it might leave individuals who are acceptable in extra curricular exercises or who are in a manner all rounders.

(c) : - This training will in general lessening the flagging value,let us state an organization wants enrollment and is keen on individuals over certain GPA,now a few people who likewise qualified for additional rounds attributable to review expansion will be unable to do well in adjusts explicitly intended for individuals who really scored over that GPA and friends may believe that there is some kind of problem with their marker of GPA.

(d) : - I figure high capacity understudies would feel distressed because of it attributable to review swelling in a manner hurting them off their opportunity as organizations may believe that GPA isn't the correct pointer while for low capacity understudies it is nothing to lose,everything to pick up circumstance as in any case without grade expansion they would not have qualified in any case.

(e) : - I think GPA isn't at all powerless against this criticism,once you are inside the college,it is your difficult work and capacity to learn and apply which anybody can without much of a stretch accomplish that prompts a certain GPA,comparing to some different markers, for example, entry level position from a decent organization or past instruction from premium yet exorbitant schooling,it is greatly improved as it centers around contrasting understudies from same arrangement of parameter where riches is certainly not a noteworthy factor.