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Learning by doing and adverse selection : the importance of commitment

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  • Ian E. Novos

    (Georgia Insitute of Technology, Atlanta)

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    Abstract

    The analysis in Novos (1990) is extended to incorporate a richer signalling dimension. Specifically, firms observe the evolving employment histories of workers. Results show, firstly, that when firms are not integrated across tasks there is an inefficient allocation of workers across tasks. Second, when firms are integrated across tasks workers are, ex-ante, efficiently allocated across tasks. Finally, when firm structure is an endogenous choice firms will choose to be integrated. A crucial role in the analysis is occupied by the idea ofa »promotion commitment.» The central role often played by personnel departments in this regard is discussed.

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    Bibliographic Info

    Article provided by Finnish Economic Association in its journal Finnish Economic Papers.

    Volume (Year): 5 (1992)
    Issue (Month): 2 (Autumn)
    Pages: 79-90

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    Handle: RePEc:fep:journl:v:5:y:1992:i:2:p:79-90

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    1. Stephen Ross & Paul Taubman & Michael L. Wachter, 1981. "Learning by Observing and the Distribution of Wages," NBER Chapters, in: Studies in Labor Markets, pages 359-386 National Bureau of Economic Research, Inc.
    2. Novos, Ian E., 1992. "Learning by doing, adverse selection and firm structure," Journal of Economic Behavior & Organization, Elsevier, vol. 19(1), pages 17-39, September.
    3. Malcomson, James M, 1984. "Work Incentives, Hierarchy, and Internal Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 486-507, June.
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