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A Model of Asymmetric Employer Learning with Testable Implications

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Author Info
JOSHUA C. PINKSTON

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Abstract

This paper helps close the gap between theory and empirical evidence in the literature on asymmetric employer learning. If an employer's private learning is reflected in a worker's wage and one employer's private information is transmitted to the next when the worker makes a job-to-job transition, then asymmetric employer learning will appear in wage regressions as learning over an employment spell. Extending previous work that assumes all learning takes place publicly, this paper develops wage regressions that test for both asymmetric employer learning and public learning. The empirical results, including tests of alternative explanations, are consistent with asymmetric employer learning's having at least as much of an effect on wages during an employment spell as does public learning. The model developed in this paper illustrates how the story suggested by the empirical work might unfold. It shows that outside firms can profitably compete with a better-informed employer through bidding wars, even when the worker is equally productive in all firms. Furthermore, this competition results in different wages for workers with the same publicly observable characteristics, a result that previous models of asymmetric learning have not produced. Copyright © 2009 The Review of Economic Studies Limited.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-937X.2008.00507.x
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Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 76 (2009)
Issue (Month): 1 (01)
Pages: 367-394
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Handle: RePEc:bla:restud:v:76:y:2009:i:1:p:367-394

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  6. Farber, Henry S & Gibbons, Robert, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1007-47, November. [Downloadable!] (restricted)
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  11. Medoff, James L & Abraham, Katharine G, 1980. "Experience, Performance, and Earnings," The Quarterly Journal of Economics, MIT Press, vol. 95(4), pages 703-36, December. [Downloadable!] (restricted)
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  12. Katharine G. Abraham & Henry S. Farber, 1987. "Job Duration, Seniority, and Earnings," NBER Working Papers 1819, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Oettinger, Gerald S, 1996. "Statistical Discrimination and the Early Career Evolution of the Black-White Wage Gap," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 52-78, January. [Downloadable!] (restricted)
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  16. Edward P. Lazear, 1984. "Raids and Offermatching," NBER Working Papers 1419, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Gibbons, Robert & Waldman, Michael, 1999. "Careers in organizations: Theory and evidence," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 36, pages 2373-2437 Elsevier. [Downloadable!] (restricted)
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  21. Bikhchandani, Sushil, 1988. "Reputation in repeated second-price auctions," Journal of Economic Theory, Elsevier, vol. 46(1), pages 97-119, October. [Downloadable!] (restricted)
  22. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Internal Economics of the Firm: Evidence from Personnel Data," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 881-919, November. [Downloadable!] (restricted)
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  25. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jan Zabojnik, 2008. "Promotion Tournaments in Market Equilibrium," Working Papers 1193, Queen's University, Department of Economics. [Downloadable!]
  2. DeVaro, Jed & Waldman, Michael, 2006. "The signaling role of promotions: Further theory and empirical evidence," MPRA Paper 1550, University Library of Munich, Germany. [Downloadable!]
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