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Counteroffers and Efficiency in Labor Markets with Asymmetric Information

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  • Limor Golan

    (Carnegie Mellon University)

Abstract

This article considers the effect of offer matching on labor market outcomes when the current employer has better information about his worker's productivity than potential employers. Previous research found that when current employers have better information than potential employers, the latter use job assignment to infer an employed worker's qualifications. As a result, assignment of workers to jobs is inefficient. I find that when current employers can match outside offers, the equilibrium outcome may be efficient. I analyze the effect of the asymmetric information on investment in human capital made by employers and workers, and find these investment levels to be first best.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 23 (2005)
Issue (Month): 2 (April)
Pages: 373-393

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Handle: RePEc:ucp:jlabec:v:23:y:2005:i:2:p:373-372

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Cited by:
  1. Néria Rodréguez-Planas, 2011. "Displacement, Signaling, and Recall Expectations," Working Papers 550, Barcelona Graduate School of Economics.
  2. Feng, Shuaizhang & Zheng, Bingyong, 2010. "Imperfect Information, On-the-Job Training, and the Employer Size-Wage Puzzle: Theory and Evidence," IZA Discussion Papers 4998, Institute for the Study of Labor (IZA).
  3. Li, Jin, 2013. "Job mobility, wage dispersion, and technological change: An asymmetric information perspective," European Economic Review, Elsevier, vol. 60(C), pages 105-126.
  4. DeVaro, Jed & Waldman, Michael, 2006. "The signaling role of promotions: Further theory and empirical evidence," MPRA Paper 1550, University Library of Munich, Germany.
  5. DeVaro, Jed, 2011. "Using "opposing responses" and relative performance to distinguish empirically among alternative models of promotions," MPRA Paper 35175, University Library of Munich, Germany.
  6. William MacKenzie & Brian Klaas & John McClendon, 2012. "Information Use in Counter-Offer Decisions: An Examination of Factors that Influence Management Counter-Offer Decisions," Journal of Labor Research, Springer, vol. 33(3), pages 370-387, September.
  7. Junichiro Ishida, 2012. "Promotion without Commitment: Signaling, Time Inconsistency and Decentralization of the Firm," ISER Discussion Paper 0843, Institute of Social and Economic Research, Osaka University.
  8. Waldman, Michael, 2013. "Classic promotion tournaments versus market-based tournaments," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 198-210.
  9. Timothy J. Perri, 2005. "Raiding and Signaling in the Academic Labor Market," Working Papers 05-21, Department of Economics, Appalachian State University.

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