Screening hypothesis

Screening hypothesis maintains that education is a filter, or screen, by which innate talent is identified.

The purpose of education is seen as confirmation of an individual’s capability to be trained on the job rather than the conferring of skills to a worker. It is used as an alternative to human capital theory.

Also see: human capital theory, search theory

Screening in economics refers to a strategy of combating adverse selection, one of the potential decision-making complications in cases of asymmetric information, by the agent(s) with less information. The concept of screening was first developed by Michael Spence (1973),^[1] and should be distinguished from signalling, a strategy of combating adverse selection undertaken by the agent(s) with more information.

For purposes of screening, asymmetric information cases assume two economic agents—which we call, for example, Abel and Cain—where Abel knows more about himself than Cain knows about Abel. The agents are attempting to engage in some sort of transaction, often involving a long-term relationship, though that qualifier is not necessary. The “screener” (the one with less information, in this case, Cain) attempts to rectify this asymmetry by learning as much as he can about Abel.

The actual screening process depends on the nature of the scenario, but is usually closely connected with the future relationship.

In education economics, screening models are commonly contrasted with human capital theory. In a screening model used to determine an applicant’s ability to learn, giving preference to applicants who have earned academic degrees reduces the employer’s risk of hiring someone with a diminished capacity for learning.