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Job Market Signalling of Relative Position, or Becker Married to Spence

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  • Ed Hopkins

Abstract

We consider a matching model of the labour market where workers that differ in quality send signals to firms that are also vertically differentiated. Signals allow assortative matching in which the highest quality workers send the highest signals and are hired by the best firms. Matching is consider both when wages are fixed (non-transferable utility) and when they are fully flexible (utility is transferable). In both cases payoffs are determined by relative position - the best worker gets the best job. The standard signalling model which communicates the signaller’s absolute type is a special case of the current model of signalling relative position. Furthermore, in the relative model, equilibrium strategies and payoffs depend on the distributions of types of workers and the distribution of firms. This is in contrast with separating equilibria of the standard model which do not respond to changes in supply or demand. Despite incomplete information, equilibrium investment in education by low ability workers can be inefficiently low.

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Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 321307000000000553.

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Date of creation: 27 Oct 2006
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Handle: RePEc:cla:levrem:321307000000000553

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  4. Patrick Legros & Andrew F. Newman, 2007. "Beauty Is a Beast, Frog Is a Prince: Assortative Matching with Nontransferabilities," Econometrica, Econometric Society, Econometric Society, vol. 75(4), pages 1073-1102, 07.
  5. Hopkins, Ed & Kornienko, Tatiana, 2009. "Status, affluence, and inequality: Rank-based comparisons in games of status," Games and Economic Behavior, Elsevier, vol. 67(2), pages 552-568, November.
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  9. Harold L. Cole & George J. Mailath & Andrew Postlewaite, . "Efficient Non-Contractible Investments," Penn CARESS Working Papers 08d6793d32cab8f6e1f46dac0, Penn Economics Department.
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  16. Harold L. Cole & George J. Mailath & Andrew Postlewaite, 1995. "Incorporating concern for relative wealth into economic models," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Sum, pages 12-21.
  17. Hoppe, Heidrun C. & Moldovanu, Benny & Sela, Aner, 2006. "The Theory of Assortative Matching Based on Costly Signals," CEPR Discussion Papers 5543, C.E.P.R. Discussion Papers.
  18. Ed Hopkins & Tatiana Kornienko, 2008. "Which Inequality? The Inequality of Endowments Versus the Inequality of Rewards," ESE Discussion Papers 185, Edinburgh School of Economics, University of Edinburgh.
  19. Harold L. Cole & George J. Mailath & Andrew Postlewaite, . "Efficient Non-Contractible Investments in Large Economies," Penn CARESS Working Papers e9e0aca257b20d3bb6bb4a52a, Penn Economics Department.
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  25. Michael Peters & Aloysius Siow, 2000. "Competing Pre-marital Investments," Working Papers peters-00-01, University of Toronto, Department of Economics.
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  27. Eeckhout, Jan, 2000. "On the uniqueness of stable marriage matchings," Economics Letters, Elsevier, vol. 69(1), pages 1-8, October.
  28. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," ESE Discussion Papers 92, Edinburgh School of Economics, University of Edinburgh.
  29. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(4), pages 813-46, July-Aug..
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