Sheepskin Effects by Cohort: Implications of Job Matching in a Signaling Model.

In the presence of job matching, the returns to education signals are shown to decline in value as additional work experience allows more direct observation of productivity. This is tested by estimating sheepskin effects across five age cohorts of nonminority males in 1991. The effects are large and significant in early cohorts and virtually nonexistent in later cohorts. This pattern is partially confirmed with estimations within cohorts showing sheepskin returns declining from 1979 to 1991. The pattern within cohorts suggests that the 1991 pattern is not merely the result of vintage effects, but caution is expressed in drawing conclusions. Copyright 1997 by Royal Economic Society.