This paper develops and tests a unique model of asymmetric employer learning. The model relaxes the informational assumptions used in most of the previous literature and assumes firms compete for workers through bidding wars. As a result, outside firms can profitably compete for an employed worker who is equally productive in any firm, despite the current employer’s informational advantage. The model in this paper is the first in the literature to predict either wage growth without changes in publicly observed information (e.g., promotions) or mobility between firms without firm- or match-specific productivity. The bidding through which firms compete for a worker produces a sequence of wages that converges to the current employer’s conditional expectation of the worker’s productivity. This convergence of wages allows the model to be tested using an extension of previous work on employer learning. Wage regressions estimated on a sample of men from the NLSY produce evidence consistent with the model’s predictions.
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Paper provided by U.S. Bureau of Labor Statistics in its series Working Papers with number
390.
Length: 51 pages Date of creation: Jan 2006 Date of revision: Handle: RePEc:bls:wpaper:ec060020
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References listed on IDEAS 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.:
Gibbons, Robert & Katz, Lawrence F, 1991.
"Layoffs and Lemons,"
Journal of Labor Economics,
University of Chicago Press, vol. 9(4), pages 351-80, October.
[Downloadable!] (restricted)
Other versions:
Robert Gibbons & Lawrence Katz, 1989.
"Layoffs and Lemons,"
Working Papers
629, Princeton University, Department of Economics, Industrial Relations Section..
[Downloadable!]
Gibbons, R. & Katz, L.F., 1989.
"Layoffs And Lemons,"
Working papers
531, Massachusetts Institute of Technology (MIT), Department of Economics.
Robert Gibbons & Lawrence Katz, 1991.
"Layoffs and Lemons,"
NBER Working Papers
2968, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
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