Human capital vs. Signaling: For each of the following examples, explain whether the human capital model, the signalling model, or both models apply. Employers often list a 4-year college degree as a requirement for those applying for certain jobs. Teacher quality increases student lifetime earnings. All courses at a given university are open to the public to attend, but there is still an earnings premium for graduating from that university.

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The difference between signalling and human capital models is that signalling models allow firms to draw inferences about unobserved characteristics o... View the full answer