The Importance of Signalling in Job Placement and Promotion (2006)

Research Paper

In economics, “signalling” refers to the idea that one party conveys some information about himself to another party. For example, in the job market, a potential employee sends out signals about his abilities by acquiring certain education credentials, which the employer assumes are a signal that the potential employee has greater ability.

But a candidate’s observable characteristics convey only partial information about his real productivity, say the authors of this paper. As workers accumulate experience on the job, employers may acquire new information about performance and may find themselves re-evaluating hiring decisions.

The authors develop a simple model to highlight the consequences from this type of signalling, and test whether such behaviour occurs for a large sample of lawyers and Master of Business Administration (MBA) graduates who completed their education at differently ranked schools.

They found that if training is greater at firms that hire workers with better expected ability, earnings adjustments after controlling for initial firm will be correlated with new information about productivity, but not with initial signals of productivity.

Get resource
APA citation
Andrew Heisz and Philip Oreopoulos. The Importance of Signalling in Job Placement and Promotion 2006. Web. 2 Feb. 2023 <>
Andrew Heisz & Philip Oreopoulos (2006). The Importance of Signalling in Job Placement and Promotion. Retrieved February 2, 2023, from
© 2023 Copian Library