Job Market Signalling and Screening: An Experimental Comparison

We analyze the Spence education game in experimental markets.We compare a signaling and a screening variant, and we analyze the e®ect of increasing the number of employers from two to three.In all treatments, there is a strong tendency to separate.More efficient workers invest more often and employers bid higher for workers who have invested.More efficient workers also earn higher wages.Employers' pro¯ts are usually not different from zero.Increased competition leads to higher wages only in the signaling sessions.We ¯nd that workers in the screening sessions invest more often and earn higher wages when there are two employers.