Education in a "Job Ladder" Model and the Fairness-in-Hiring Rule

Bhagwati, Jagdish N.; Srinivasan, T. N.

The paper constructs a general equilibrium model of education which is distinguished by a "job ladder" or sticky wages, combined with the assumption that educated labor is preferred over uneducated labor, i.e. per a "fairness-in-hiring" rule, when there is excess demand for jobs at given wages. This theory of education, considered to be relevant to liberal arts education in underdeveloped countries, is contrasted with the human capital doctrine and the Arrow-Spence screening theories. The analysis is mainly focused on examining the social inefficiency properties of the educational process captured in the model constructed.



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Journal of Public Economics

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January 31, 2013