It is not difficult to see that a signal will not effectively dis- tinguish one applicant from another, unless the costs of signaling are negatively correlated with productive capability. For if this con- dition fails to hold, given the offered wage schedule, everyone will invest in the signal in exactly the same way, so that they cannot be distinguished on the basis of the signal. In what follows, we shall make the assumption that signaling costs are negatively correlated with productivity. It is, however, most appropriately viewed as a