Andrew Michael Spence, born in 1943, is an American economist and has been Professor at Harvard University and Stanford University, amongst others. He is currently a lecturer at New York University. His researches and contributions have been mainly in the field of economics of information, and together with economists George A. Akerlof and Joseph E. Stiglitz, Spence was awarded the Nobel Prize in Economic Sciences in 2001 for his work regarding asymmetric information.
Spence paid special attention to the study of those situations in which if certain market participants have more information than the rest, they will take care of disseminating this information to everybody. For instance, it shows how companies use their dividend policy to signal their profitability to market analysts.
In his book “Job Market Signaling”, 1973, he develops Akerlof’s previous studies and applies them to the labour market: when hiring a new employee, and as the firm does not know the labour value that this potential employee will add, they will offer an average salary level that will not match what the best candidates deserve. It is therefore important to inform others about the features that are not readily observable, what Spence called signalling. Academic degrees are a way of signalling inside the labour market as they are used to show above average labour value.