Signalling or Human Capital: Evidence from the Finnish Polytechnic School Reform

Abstract

We use data from the Finnish polytechnic reform to distinguish between human capital and signalling theories of the value of education. We find that the reform increased the earnings of polytechnic graduates compared with those graduating from the same schools before the reform, as predicted by both the human capital and the signalling models. However, we also find that the relative earnings of vocational college graduates decrease after polytechnic graduates start entering the labour market. This finding is inconsistent with the pure human capital model and can be interpreted as evidence that supports the signalling model. Copyright � The editors of the "Scandinavian Journal of Economics" 2008 .

The effect of polytechnic reform on migration

“…Hämäläinen and Uusitalo (2008) find that the relative earnings of vocational college graduates decrease in the field of business and administration after polytechnic graduates start to enter the labour market, which is inconsistent with the pure human capital model and can be interpreted as evidence that supports the signalling model of education. Böckerman et al (2009) conclude that the reform had considerable positive effects on the earnings and employment levels for graduates in business and administration but no significant effects in other fields.…”

More educated, more mobile? Evidence from post-secondary education reform

“…Further research is needed to quantify the extent to which increased migration can explain the positive effects of polytechnic education on earnings and employment (Böckerman et al, 2009;Hämäläinen & Uusitalo, 2008). More broadly, our identification strategy can also be utilized to study how education affects other outcomes.…”

Vocational Education: An International Perspective

“…In Finland, researchers exploited an education reform upgrading vocational postsecondary education into vocational bachelor's degrees. Böckerman, Hämäläinen, and Uusitalo (2008) and Hämäläinen and Uusitalo (2008) generally find short-run improvements in employment and earnings for graduates of the new program relative to the old system, using a difference-in-difference model based on the timing of the reform. Böckerman, Haapanen, and Jepsen (2018) apply matching and individual fixed effects models to show higher earnings of around 10 percent and employment of five percentage points for vocational bachelor's degrees relative to no postsecondary education.…”