Job Market Signaling

work by Spence

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July 16, 2026

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A. Michael Spence developed the theory of "signaling" to address problems in markets with asymmetric information, where one party has more knowledge than another. In his 1973 paper "Job Market Signaling," Spence illustrated how a college degree can signal a job seeker's intelligence and abilities to potential employers. This concept extends to other areas, such as corporations issuing large dividends to indicate profitability or manufacturers providing warranties to assure product quality.12

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A. Michael Spence
…his 1973 seminal paper “Job Market Signaling,” Spence demonstrated how a college degree signals a job seeker’s intelligence and ability to a prospective employer. Other examples of signaling included corporations giving large dividends to demonstrate profitability and manufacturers issuing guarantees to convey the high quality of a product.
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…his 1973 seminal paper “Job Market Signaling,” Spence demonstrated how a college degree signals a job seeker’s intelligence and ability to a prospective employer. Other examples of signaling included corporations giving large dividends to demonstrate profitability and manufacturers issuing guarantees to convey the high quality of a product.
Read More