Question: 1. In the paper "The Signaling Value of a High School Diploma" (Journal of Political Economy, 2014), Clark and Martorell attempt to differentiate between signaling and human capital theories of the returns to education. Read enough of the article to answer the following questions. The introduction (Section I) and the empirical strategy (Section IV) may be sufficient. In answering the questions, do not simply copy from the article. Expressing the ideas in your own words is the only way to learn.

(a) In general, why is it difficult to differentiate empirically between signaling and human capital theories of the returns to education? Why does the answer matter for policy?

(b) How does this paper distinguish between these two models? Sketch out the basic idea behind their approach.

(c) Transcribe the main estimation equations from Section IV. Describe them in some detail. What is the outcome? What is the treatment? What is the running variable? How do the authors model the relationship between the running variable and the outcome variables? Which are the important coefficients and what do they measure?

(d) Why do the authors use a fuzzy RD approach instead of a sharp RD approach?

(e) What assumptions are necessary for the authors' approach to be valid? What evidence do the authors provide?

(f) What do the authors estimate to be the signaling value of a high school diploma?