Does Certification Increase Returns to Human Capital? Evidence from an Audit Study in India

India has experienced a fourfold increase in tertiary enrollment over two decades, which has coincided with high rates of unemployment for college graduates. In particular, it is difficult for students to convey information about their human capital to employers if they graduate from colleges that are perceived to be of low quality. As a result, standardized exit exams created by private companies have become widespread. Such certification tests can improve labor market outcomes by allowing potential employees, especially those who are recent graduates, to credibly indicate their level of competence. Using a correspondence/audit experiment, we study the following questions: (i) What is the value to recent graduates of certification (and college quality) as a signal in the labor market? (ii) How does the certification signal affect outcomes for job seekers depending on degree type, particularly for those with a low-quality degree? (iii) For what score levels is it optimal for job seekers to reveal their certification results to potential employers? (iv) Do firms interpret gender as a signal in this setting? Conditional on observing gender discrimination, can certification mitigate its impact?

As a companion to the audit study RCT, we also plan to conduct a short survey with a sample of hiring managers. This survey will allow us to understand how hiring managers view certification tests and, more generally, make decisions about who to hire.