The act of inflating one’s career achievements is usually viewed in negative terms. Research from Cornell suggests that while it may be harmful to us as individuals, it can have societal benefits.

The researchers explain that when our education is used to signal our ability it can result in an overinvestment in credentials. This tendency can be mitigated by resume padding, which can result in a reduction in investment in education.

Effective signalling

The notion of “self-reported signaling” was investigated by researchers, expanding on the concept first introduced by Michael Spence, a former Harvard doctoral student, more than five decades ago in his thesis.

While Spence’s original signaling concept relied on signals always being valid, the self-reported signaling introduces a novel element—the signal can, in fact, be deceptive, exemplified by the Santos case.

An illustrative example of self-reported signaling is a CV, where most of the information is not widely known, and recipients expect accuracy and truthfulness. Some aspects can be verified, like education level and previous employment, while others, such as leadership qualities and work ethic, remain unverifiable, incurring high costs for verification.

To the test

The researchers constructed a model with a solitary sender (job applicant) and a group of identical receivers (hiring officers). The sender selects an action (such as stating an education level) that is not publicly known but can be verified, albeit at significant time and financial expense.

Their model incorporated assumptions regarding resume veracity, the willingness of hiring officers to verify information, and the risk-reward dynamics of dishonesty concerning education levels. Through this modeling, two key findings emerged:

• The possibility of resume padding diminishes the return on investing in higher education levels. This reduction occurs because even if a claim of higher education is truthful, the mere possibility of deception leads hiring officers to offer lower remuneration.
• As a consequence, the decreased investment in education can “undo” the excessive investment often associated with signaling, consequently increasing the “social welfare” for all senders, as characterized by the researchers.

“There is the possibility,” the authors explain, “that all this misrepresentation just lowers the incentive of investing in the signal, whether it be education or other standard activities that serve as signals, which could have a positive effect on the economy.”

The researchers extended their modeling to college admissions, focusing on applicants’ self-reported extracurricular activities and leadership roles. Through rigorous analysis, they discovered that the prospect of misrepresentation decreases the tendency for excessive investment in these pursuits, and intriguingly, it could potentially lead to a net improvement in overall social welfare.

“We typically think of lying as being unambiguously bad,” the authors conclude. “At the same time, however, we know that signaling results in distortions which serve to lower social welfare. If self-reports of actions serve as signals … there can be a social welfare benefit as the misrepresentation reduces the signaling distortion.”