| Michael Spence |
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| CATEGORIES ABOUT MICHAEL SPENCE | |
| 1943 births | |
| living people | |
| economists | |
| princeton university alumni | |
| nobel laureates in economics | |
| harvard centennial medal recipients | |
| canadian rhodes scholars | |
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Michael Spence is probably most famous for his job-market Signaling model, which essentially triggered the enormous literature in this branch of Contract Theory . In this model, employees signal their respective skills to employers by acquiring a certain degree of education, which is costly to them. Employers will pay higher wages to more educated employees, because they know that the proportion of employees with high abilities is higher among the educated ones, as it is less costly for them to acquire education than it is for employees with low abilities. For the model to work, it is not even necessary for education to have any intrinsic value if it can convey information about the sender (employee) to the recipient (employer) and if the signal is costly. In 1966, Spence was awarded the Rhodes Scholarship upon graduation from Princeton University with a degree in Mathematics. LITERATURE Spence, A.M.: "Job Market Signaling", ''Quarterly Journal of Economics'' Vol. 87, No. 3 (1973), pp. 355-374. SEE ALSO
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