Economics · Economics of Education
In the context of 'Economic Returns to Higher Education,' why does the Signalling Model sometimes explain empirical findings better than the Human Capital Model (HCM)?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1HCM assumes all majors are qualitatively equal and only 'years of schooling' matter.
- 2Signalling theory assumes that studying one major over another has no impact on human capital.
- 3High disparity in earnings across majors (e.g., science vs. humanities) defies the HCM 'years of schooling' logic.✓
- 4Signalling theory ignores the cost of obtaining a degree.
Correct answer
High disparity in earnings across majors (e.g., science vs. humanities) defies the HCM 'years of schooling' logic.
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