Education Models: Human Capital, Signaling, and Government Role

This essay delves into two prominent models of education: the human capital model and the signaling model. The human capital model posits that education enhances a population's productive capacity, leading to economic growth through increased worker efficiency and higher incomes. Conversely, the signaling model views education as a means of displaying unobservable individual abilities, where degrees signal skills and discipline. The essay further explores government intervention in education, arguing that it is crucial for providing access to education, especially where the market fails, and aligning with the human capital theory to invest in human resources. The paper also discusses the limitations and implications of each model, including recommendations for government policies such as subsidies and vocational training, aiming for both efficiency and equity in education.

Running Head: EDUCATION
Course
Name
Institution Affiliation

EDUCATION
Models of Education
Human Capital Model
The human capital model of education asserts that formal education is useful in improving the
productive capacity of a population. In simple terms according to the theory, an educated
population is a productive population. It asserts that the productivity and efficiency of the
workers is increased through an increase in the level of the cognitive abilities of the individual
that results from their innate nature and investment in education (Keep and Mayhew, 2004). For
this reason, human capital is seen as investment in human capital. The theory concludes that this
investment may lead to higher economic outputs. The human capital theory provides a backing
for large government expenditure on education in countries as it is argued that human resources
provide the ultimate basis for the wealth of the countries as it creates increased chance for
employment as well as higher incomes for the individual. The theory argues that government
subsidies in education are good because they act as investments towards the economic growth of
the country. From the model, education is seen as a merit good (Belfield, 2000).
Signaling Model
According to the signaling model of education, education acts as a means of showing the
unobservable ability of an individual. A high school or college degree would act as a means of
showing the combined effects of accumulation of human capital which means that the individual
has acquired skills that make them more productive (Neal, 2002). It also shows a higher ability
where the individual is seen to have a higher ability compared to those who may have dropped
out from school. The higher ability means the discipline they have had in pursuing education.
The model reveals that higher university access enables the high ability students to enroll in

EDUCATION
universities and the signaling value of a high school degree reduces and therefore there is more
incentive to obtain a university degree. It therefore provides a way of evaluating the effects of
school drop outs, level of education desired by employees and drop out rates. From the model,
signaling suggests productivity is independent of education though education provides means of
showing more ability. This model suggests an economically efficient use of education since
individuals may only pursue higher education as a means of signaling. For this reason, it makes
more sense to privatize education compared to the public funds being used to provide expansion
for higher education. The model also suggests that efforts should then be made in the provision
of practical vocational training compared to three-year long degrees. Further, it also suggests that
if education was taken to be signaling fully, it would make sense to tax education in order to
create more room for productivity(Dearden and Blundell, 2005).
Government intervention in Education
Government intervention in education is important. The government provides for where the
market fails and therefore government intervention in education provides a merit good for the
larger society who for one reason or the other may not be in a place to afford the high cost of
education if it was private. According to the human capital theory, government intervention in
education is allowable since the government is investing in its human capital in order to derive
benefits of economic growth from increased productivity of the human capital. For this reason, it
may seem useful for the government to provide subsidies and to some extent free public
education. Secondary education is somewhat a basis level education and therefore it may make
sense for the government to provide subsidies at this level. However, in the case of tertiary
education, it may not be efficient for the government to provide these subsidies. This is because
it may not be a guarantee for the individuals in the population to seek out education as a means

EDUCATION
to be productive in the society. Further, the government may have to incur a huge expense which
may in turn lead to more taxes being paid by the community. The limitation with signaling is that
it reduces the efficiency and the equity in education since certain courses are made more
expensive since they have a higher market power (Wolf, 2004). Efficiency and equity in
education can be made possible if education is made accessible to all and individuals have the
choice of the type of education they would like to pursue instead of having to pursue a certain
certification only because it provides as a means of signaling in the employer market. In this
way, more people will not only have education but also have education which makes them
productive to the larger society (Riley, 2001).
Government recommendations
Education is some form of investment. The government should be able to provide its citizens
with capabilities not only for their individual lives but also to contribute to the overall growth of
the economy. Going by the human capital theory, government subsidies are relevant as they
provide investment for the nation. However the subsidies should not be forceful rather they
should be empowering.
References
Belfield, C.R., 2000. Economic principles for education. Books.
Dearden, L., Sianesi, B. and Blundell, R., 2005. Measuring the returns to education. Princeton
University Press.
Keep, E. and Mayhew, K., 2004. The economic and distributional implications of current
policies on higher education. Oxford Review of Economic Policy, 20(2), pp.298-314.

EDUCATION
Neal, D., 2002. How vouchers could change the market for education. Journal of Economic
Perspectives, 16(4), pp.25-44.
Riley, J.G., 2001. Silver signals: Twenty-five years of screening and signaling. Journal of
Economic literature, 39(2), pp.432-478.
Wolf, A., 2004. Education and economic performance: Simplistic theories and their policy
consequences. Oxford review of economic policy, 20(2), pp.315-333.