Fake it till you (don’t) make it: Fake diplomas and signaling in labor markets
About the presentation
Does schooling create new skills or does it merely signal individuals’ underlying abilities? We provide new and innovative evidence on this longstanding question in the context of adult education in Brazil. In 2018, police in Rio de Janeiro abruptly shut down 21 high schools, presenting evidence that these schools sold diplomas without providing any educational instruction whatsoever - thus providing a signal but not human capital. We match student records with historical employment data and find that initially, the labor Market returns to high school degrees are similar for individuals with legitimate and fake credentials. However, within a few years, the value of fake diplomas begins to decline. The initial gains for fake diploma holders seem to be closely associated with a spike in the probability of changing jobs and occupations shortly after obtaining the diploma. However, over time, these individuals experience substantially greater volatility in formal labor market participation: the likelihood of leaving a job at least three times over the period is 10 percentage points higher. We also find additional evidence that the value of the fake credential depreciates more rapidly in contexts where worker productivity is more readily observable. Overall, the results provide strong evidence that, at least in the short term, schooling acts primarily as a signal in the labor market. However, the strength of that signal erodes quickly as employers learn about the true productivity of their employees.
About Eric Bettinger
Eric Bettinger is the Conley DeAngelis Family Professor in the Stanford University School of Education and a Senior Fellow at the Hoover Institution. He is also a research associate in the program on education at the National Bureau of Economic Research. Bettinger is the Director of the Center for Educational Policy Analysis and the Director at the Lemann Center for Brazilian Education at Stanford. His research interests include economics of education; student success and completion in college; the impacts of online education; the impacts of financial aid; teacher characteristics and student success in college; effects of voucher programs on both academic and non-academic outcomes. Eric’s research focuses on using rigorous statistical methods in identifying cause-and-effect relationships in higher education. His research on simplifying financial aid applications has influenced recent efforts by the White House to simplify financial aid processes. He has served as a consultant to the White House and various state governments on financial aid policies.
