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A model of mixed signals with applications to countersignalling


  • Part of this research was done when the second author was a student at the Getulio Vargas Foundation. The authors thank Juliano Assunção, Abhijit Banerjee, Luis Henrique Braido, Flávio Cunha, Carlos E. da Costa, Mathias Dewatripont, Glenn Ellison, James Heckman, Bengt Holmstrom, Derek Neal, Jean Tirole, Marcos Tsuchida, a coeditor, and two referees for helpful comments and suggestions. Earlier versions of this article were presented in the Meeting of the Brazilian Econometric Society (João Pessoa, 2004), the Conference in Tribute to Jean-Jacques Laffont (Université de Toulouse, 2005), the Summer Meeting of the Econometric Society (Minneapolis, 2006), the Latin American Meeting of the Econometric Society (Mexico, 2006), the Workshop in Mathematical Economics (Rio, 2006), and seminars at the University of Chicago, the Getulio Vargas Foundation, and MIT. All remaining errors are the authors' alone.


We develop a job-market signalling model where signals convey two pieces of information. This model is employed to study countersignalling (signals nonmonotonic in ability) and the GED exam. A result of the model is that countersignalling is more likely to occur in jobs that require a combination of skills that differs from the combination used in the schooling process. The model also produces testable implications consistent with evidence on the GED: (i) it signals both high cognitive and low noncognitive skills and (ii) it does not affect wages.