The Screening Function of Certification- Evidence from the Freshmen
Labor MarketLong-Hwa Chen
Aletheia University, Tainan, Taiwan
CCP, ASB, Aarhus University, Denmark
lowc@asb.dk

Tor Eriksson
Aarhus School of Business, Aarhus
University, Aarhus, Denmark

Abstract
There are three forms of occupational regulations: registration, certification andlicense (Kleiner 2008). Registration is the least restrictive form which without any
qualification test. Certification is more restrictive than registration which anyworkers can perform a relative task, but those who pass examination will be certifiedand given a certain level of skill proof. Licensing is the most restrictive way ofregulation which regulates the right to practice by law. The function of theseregulations usually include minimize uncertainty for consumer, social implications
like public security and reduce the labor supply (Kleiner 2006).
From the employer perspective, certifications provide a quick way to screen amatching candidate in job market as firms normally cannot (and if so, at high cost)assess the productivity or skill level in recruiting employees with no prior experience.
From the employee’s perspective, the certificate represents a certain level of humancapital beyond educational credentials. It can be a clear proof of some specifichuman capital rather than a general human capital. The screening function ofoccupational certification plays an important role, which may be measured by how it
shortens job search durations.
As Taiwan has experienced an educational expansion (ninety percent ofuniversity enrollment rate after 2006) and the unemployment rate for highly
educated workers has reached historically high levels, the students are eager to takepart in certification exams in order to improve their competitive position in the job
market. Besides their bachelor diploma, fortyfive percent of college graduate
students hold at least one certification and the ratio are increasing year by year.
The most common certifications are IT and language (mainly English and Japanese).
There are also some popular industry-sponsored certifications like financial
certifications and technical certifications. Can these credentials make them better off

in finding a good job and getting a job sooner?
The survey used in this study is sponsored by Taiwan’s National Science
Council as well as Taiwanese Ministry of Education, and it was conducted by theCenter for Higher Education Research. The respondents were college graduates whograduated in June 2005 (2005–2006 academic year juniors), and were surveyed
between June 2007 and February 2008. A stratified sample of 88,694 college
graduate students was randomly selected from 158 universities (262,743 students) tocomplete a questionnaire online. The original data contained about 33.76% (88,694workers) of all college graduates for the year 2005. It also includes those who keepon study in graduate school (26.48%), are doing military service (10.6%, mainlymale) and who are searching for a job (8.5%). We keep only graduates who have a
job with pay for this study. Additionally, in order to maintain the consistency of allobservations, respondents with some missing data were excluded. The final sample
used in this study comprised 22,404 observations.
In the survey, the respondents were asked how many months they spentsearching for the current jobs. Thus, discrete time duration models are used in theempirical analysis. The left hand side is a binary variable which represent theprobability of the freshman to find his/her job. Right hand side variables include
thirty duration spell indicators as well as a host of individual social demographic andfirm characteristics. Seven categories of certification are reported in the survey: civil
servant, teacher, financial, professional technicians, language, IT and others.
Because the public sector job markets have different settings, we exclude the public
sector and therefore eliminate civil servants and teachers for analysis. A positivecoefficient to the independent variable means positive associate to the probability ofa college student found her or his current job. In this data set, we cannot observe
any change conditions across time and therefore no time varying covariate areincluded in the models. In addition, wage equations are applied to measure thewage differential among workers with different certificates.
The preliminary results show that having any type of certificate does not yield awage premium but is associated with a shorter duration in landing a job. Amongthe certificates, language certification contributes in both getting a higher paid job
and shortening duration of search. On the other hand, IT certificates result in anegative wage returns and no clear impact on search time. The financial
certificates show a positive wage premium but also have no clear effect on search
duration. For job seekers with professional technical certificates, the overall

contributions to wage are negative, but they can easily find a first job. The data set
allow us to do a further exploration by regrouping job seekers into two different skilllevels. The basic level skills significantly yield a negative return but find a job
sooner. In contrast, an advanced skill certificate yield positive premium but takelonger time in get a job. The channels used in searching for jobs proved to beimportant, too. In contract with the modern way of surfing on the internet, thetraditional method of searching vacancy on news paper is not only associated with alower pay but also with a longer time before finding a job.
The analysis so far based on separate estimations for wage and duration. Weaware that the two factors might be simultaneously determined. A structural
simultaneous equations approach will be employed for in next step.
JEL codes: J32, J33, M5, M12

Acknowledgement: The authors would like to express gratitude to the Center for Higher Education
Research at National Taiwan Normal University for providing the data.