Sheepskin effect

The sheepskin effect is a phenomenon in applied economics observing that people possessing a completed academic degree earn a greater income than people who have an equivalent amount of studying without possessing an academic degree.[1][2] There are many applied economics papers which investigate the signaling effect of possession of such an academic degree.

For example, if Student A is one credit short of a Bachelor's degree, while Student B has earned their Bachelor's degree, then the two students have essentially the same amount of education. However, according to the sheepskin effect, Student B will earn a greater income than Student A.

Newer evidence suggests that the sheepskin effect exists but could be contingent on the type of degree – Associate's or Bachelor's – earned.[3]

References
  1. Belman, D. and Heywood, J.S., 1991. Sheepskin effects in the returns to education: An examination of women and minorities. The Review of Economics and Statistics, pp.720-724. JSTOR: 2109413
  2. Hungerford, T. and Solon, G., (1987). Sheepskin effects in the returns to education. The Review of Economics and Statistics, pp.175-177. JSTOR: 1937919
  3. Jaeger, D., & Page, M. (1996). Degrees Matter: New Evidence on Sheepskin Effects in the Returns to Education. The Review of Economics and Statistics, 78(4), 733-740. JSTOR: 2109960 doi: 10.2307/2109960
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