Essays in the Economics of Education: Returns to Ability Signals

This thesis investigates how ability signals shape the returns to higher education and influence educational and professional trajectories. While human capital theory attributes labor market returns to productivity-enhancing skills, signaling theory emphasizes education’s role in conveying information about underlying ability. Contributing new causal evidence to this debate, the thesis examines three distinct signals, institutional prestige, relative class rank, and academic distinctions, and studies how they affect evaluation processes, aspirations, and job sorting. Across three essays, it shows that ability signals influence not only how individuals are assessed by others, but also how they perceive themselves and choose their careers. The first essay (co-authored) studies how institutional prestige affects peer evaluation in academia. Focusing on early-career conferences in economics, which are key for visibility and network formation, we conduct a field experiment comparing assessments of identical research papers under anonymous versus affiliation-revealed review. Affiliation with highly ranked institutions significantly increases acceptance probabilities, an advantage largely driven by reviewers from similarly prestigious institutions. Although statistical discrimination cannot be ruled out, the persistence of the effect across information conditions and its amplification for lower-quality submissions point to taste-based bias. Institutional signals thus shape access to academic opportunities and may reinforce inequalities within the profession. The second essay examines how students’ relative standing among peers influences the decision to pursue a PhD. Using administrative and survey data on Master’s graduates from the University of Turin, and exploiting quasi-random variation in peer ability distribution across cohorts, I identify the causal impact of class rank on aspirations and early career choices. Higher-ranked students are more likely to delay labor market entry, report lower reservation wages, express interest in doctoral studies, and enroll in PhD programs. Effects are concentrated among male students, highlighting gender differences in responses to rank and in the formation of self-beliefs. By showing how relative performance shapes motivation, preferences, and willingness to trade wages for study–job alignment, this chapter uncovers a mechanism through which educational signals influence long-term academic trajectories. The third essay analyzes the signaling value of academic distinctions at labor market entry. Linking university administrative records with employer-employee data and exploiting grade thresholds for honors in a regression discontinuity design, I estimate the causal effect of receiving a distinction. Distinctions steer graduates toward highly skilled and intellectual occupations, particularly directing men into higher education institutions. Beyond wages or job search duration, academic honors affect job sorting and career direction. The findings are consistent with distinctions acting both as employer signals and as self-signaling devices that reinforce prior preferences. The absence of comparable effects outside academia suggests a potential mismatch between skills rewarded within universities and those valued in the broader labor market. Taken together, the essays show that ability signals embedded in higher education play a central role in shaping evaluations of merit, educational investments, and career choices. By identifying causal effects across contexts, the thesis highlights how signals influence opportunity, selection, and the allocation of human capital in academia and beyond.