Imagine that you can accurately measure the variables “employee skill” and “employer perception of employee skill”. Draw a causal diagram with the variables Education, Employee Skill, Employer Perception, Earnings, and Access to Education. Assume that Access to Education represents some background factor that affects all four other variables. Draw the arrows that you should be there, based on what you know about signaling and human capital theory. For simplicity, assume there’s no other factor that affects Education.

1. What would you want to control for in order to get the causal signaling-only effect of education on earnings?

2. What would you want to control for in order to get the causal human capital-only effect of education on earnings?

3. Why is it unlikely that we’ll be able to actually do either of a or b?

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Employability skills are also known as transferable or soft skills These are the fundamental teamwork and personal skills you need to succeed in almost every job Examples of employability skills inclu... View the full answer