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Wage Dispersion and Labour Turnover with Adverse Selection

Carrillo-Tudela, C and Kaas, L (2011) Wage Dispersion and Labour Turnover with Adverse Selection. UNSPECIFIED. Working Paper Series of the Department of Economics, University of Konstanz 2011-29..

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Abstract

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 15:09
Last Modified: 17 Aug 2017 18:11
URI: http://repository.essex.ac.uk/id/eprint/2743

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