Does Participation in Productive Associations Signal Trust and Creditworthiness? Evidence for Nicaragua
- Diego F. Angel-Urdinola, Ezequiel Molina
Under two-dimensional asymmetric information, education is a noisy job-market signal, so supplementary information is needed to determine a worker’s ability. On-the-job interaction reveals a worker’s productivity to the employer. Signs like employment relationships or promotions may reveal this private information to the market. Unlike signals, a worker does not voluntarily select signs. We analyze in particular one sign, employment relationships, finding they only lead to public revelation of productivity if wages are sticky. When jobmarket signs are noisy, education is valuable for high-ability workers as a life-time job market signal.