Work in Progress

"Education Choices and Job Market Characteristics"

Joint with Inés Macho-Stadler

Abstract: We propose a simple three-stage model where heterogeneous schools compete via tuition fees, individuals with the ex-ante unknown innate ability make their education choices to reveal their ability, and finally the job market determines the assignment of workers to firms and the equilibrium wages. In equilibrium, wages in the labor market and schools’ fees, and individuals’ school choices are strongly related. We also analyse the government’s incentives to subsidize schools to increase social welfare.