Damon Clark: The Signaling Value of a High School Diploma

This paper distinguishes between the human capital and signaling
theories by estimating the earnings return to a high school diploma.
Unlike most indicators of education (e.g., a year of school), a diploma
is essentially a piece of paper hence by itself cannot affect
productivity. Any earnings return to holding a diploma must therefore
reflect the diploma’s signaling value. Using regression discontinuity
methods to compare the earnings of workers that barely passed and barely
failed high school exit exams - standardized tests that students must
pass to earn a high school diploma - we find little evidence of diploma
signaling effects.