Workers: Type $\theta \in \{L, H\}$ (productivity) Education: Cost $c(\theta, e) = e/\theta$ (higher types find education cheaper) Firms: Pay wage equal to expected productivity given observed education Separating equilibrium: $H$ chooses $e^* > 0$, $L$ chooses $e=0$. Firms pay $w = H$ for $e \geq e^*$, $w = L$ for $e < e^*$. Condition: $e^*$ must satisfy $\frac{e^*}{L} \geq H - L$ (no incentive for $L$ to mimic) and $\frac{e^*}{H} \leq H - L$ ($H$ prefers to signal). Join Discord PreviousBayesian GamesNextAuctions & Mechanism Design