Is Education Human Capital Or A Signal?

In the study of the influence mechanism of education on income,human capital and signal display theory provide two completely different explanations.The former holds that education affects income by improving ability,while the latter holds that education gains income by sending ability signals.From the results of relevant literature,empirical conclusions are not uniform,and such quantitative research is relatively scarce in China.Therefore,this paper chooses the departmental comparison method(the analysis of the difference between the self-employment and the employee group's educational return rate)to empirically test the processing effect and selection effect of education.This paper explores the proportion of educational signaling in the total income of Education under the background of China's labor market.This not only provides a reference for the discussion of labor force and education theory in China,but also provides a basis for relevant policy recommendations.In data,this paper uses CLDS2016 cross-section data.In the empirical model,besides OLS regression,Heckman two-stage model and endogenous transformation model are used to eliminate the self-selection bias between self-employed and employed samples.The empirical results show that descriptive statistics,OLS regression,Heckman's two-stage method and endogenous transformation model all support the empirical conclusion that signaling has a significant impact on China's labor market.The core empirical conclusions include the following five points:Firstly,the existence of educational signal display function leads to the average education level of the employed group is higher than that of the self-employed group.Secondly,because the education variables of the employee group have a higher degree of interpretation of their income,this leads to a higher degree of interpretation of the income regression equation of the employee group under the same variables and the same model.Thirdly,there is a serious self-selection bias between self-employed and employed groups,which leads to the serious error that the return rate of education of self-employed groups is higher than that of employed groups.Fourthly,on the basis of controlling self-selection bias,the educational return rate of all levels of the employed group is higher than that of the self-employed group.Fifthly,the empirical results of endogenous transformation model show that the explanatory power of signal display theory to the return rate of higher education(college degree and above)is 25.2%,and 30%if measured by the annual return rate of education.Sixthly,the empirical results of career choice equation show that there are still large institutional constraints for rural labor force to enter the formal employment sector.Finally,according to the empirical results,this paper puts forward some relevant policy recommendations.