Abstract
Using longitudinal data on university leaver cohorts in the period from 2006 to 2016, we investigate the impact of the Bologna reform on Swiss graduates’ returns to higher education. Drawing on the job market signaling model, we expect lower returns for graduates who enter the labor market with a bachelor’s degree. Moreover, we expect that the initial wage difference between bachelor and master graduates will become less volatile over time, since employers constantly update their beliefs about graduates’ employability. Controlling for selection into employment and a number of different signals sent by the graduates, we find a persistent advantage of a master’s over a bachelor’s degree. The new degrees, and especially a bachelor’s degree, did indeed serve as a noisy signal about graduates’ productivity in the first years of the Bologna process.
Highlights
The restructuring of the higher education system in the Bologna process presents an ideal setting in which to study the formation of monetary returns to different degrees of higher education
In contrast to traditional human capital theory (Becker, 1964; Mincer, 1974), signaling theory suggests that the returns to different degrees of higher education do not reflect skills acquired throughout the time spent in the education system, but are mere indicators of ex-ante abilities and productivity (Arrow, 1973; Spence, 1973; Stiglitz, 1975)
The probabilistic nature of signals and their dynamic, mutual relation to the offered wage implies that returns to education vary with time, and, especially, with the amount of uncertainty associated with an educational certificate
Summary
The restructuring of the higher education system in the Bologna process presents an ideal setting in which to study the formation of monetary returns to different degrees of higher education. In this regard, Switzerland is an especially interesting case since there was no equivalent degree to a bachelor’s before the reform was implemented (Glauser, Zangger, & Becker, 2019). Since signals are alterable, workers select different signals based on anticipated earnings (Spence, 1973) In this regard, acquiring a signal is costly and depends on an individual’s ability: Successfully completing an MA, for example, comes along with less effort for high-ability individuals and is more demanding for low-ability individuals. The probabilistic nature of signals and their dynamic, mutual relation to the offered wage implies that returns to education vary with time, and, especially, with the amount of uncertainty associated with an educational certificate
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