The sheepskin effect is an applied economics theory that people possessing an academic degree earn a greater income than people who have an equivalent amount of studying without possessing an academic degree. 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.
- 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
- Hungerford, T. and Solon, G., (1987). Sheepskin effects in the returns to education. The Review of Economics and Statistics, pp.175-177. JSTOR: 1937919
- 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