Abstract
Firms may invest in ICT capital to enhance the productivity of agents on tasks where output depends on talent. When firms use costly education as a signal of comparative advantage for equilibrium task allocation, a low price of education leads to too few, and a high price of education leads to too many graduates on the labor market. Consequently, firms screen workers. I propose a model, in which hiring is simultaneous with screening and ICT investment. The uncertainty of final task allocation at the time of hiring may deter firms from investing in ICT capital. Consequently, there is an inverted U-shape pattern between the supply of educated and ICT investment per worker. I find evidence for this relationship in firm-level data drawn from the US National Employer Survey (1997).
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