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Wage Dispersion and Labor Turnover with Adverse Selection

Carrillo-Tudela, C and Kaas, L (2011) Wage Dispersion and Labor Turnover with Adverse Selection. UNSPECIFIED. Institute for the Study of Labor, Discussion Papers, 5936.

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We consider a model of on-the-job search where firms offer long-term wage contracts to workers of different ability. Firms do not observe worker ability upon hiring but learn it gradually over time. With sufficiently strong information frictions, low-wage firms offer separating contracts and hire all types of workers in equilibrium, whereas high-wage firms offer pooling contracts designed to retain high-ability workers only. Low-ability workers have higher turnover rates, they are more often employed in low-wage firms and face an earnings distribution with a higher frictional component. Furthermore, positive sorting obtains in equilibrium.

Item Type: Monograph (UNSPECIFIED)
Uncontrolled Keywords: adverse selection; on-the-job search; wage dispersion; sorting
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 03 Jul 2012 15:19
Last Modified: 17 Aug 2017 18:11

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