Diploma as signal? Estimating sheepskin effects in the Philippines

• Main Author: Olfindo, Rosechin
• Format: text
• Published: Archīum Ateneo 2018
• Subjects: Sheepskin effects; Returns to education; Higher education; Secondary education; Diploma effects; Developing country; Philippines; Education Policy
• Online Access: https://archium.ateneo.edu/asog-pubs/74; https://www.sciencedirect.com/science/article/pii/S0738059316304539?via%3Dihub#!
• Institution: Ateneo De Manila University

The screening theory of education argues that education does not necessarily enhance worker’s productivity, but serves only as a signal of worker’s pre-existing ability. Empirical studies found that the mere possession of a diploma increases wages disproportionately than without it, or the so-called sheepskin effects. Using a sample of urban non-agricultural wage workers in the Philippines, this paper finds substantial sheepskin effects for holding a tertiary diploma, even after controlling for individual heterogeneity. While returns to tertiary education are lower in the competitive (private) sector, there is evidence of diverging age-earnings profiles between tertiary and secondary graduates, indicating a productive value higher education.