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Asymmetric Information in the Labor Market, Immigrants and Contract Menu

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Author Info

  • Kar, Saibal

    ()
    (Centre for Studies in Social Sciences, Calcutta)

  • Saha, Bibhas

    ()
    (University of East Anglia)

Abstract

Immigrant workers and their labor force participation in host countries have received critical attention in all concerned disciplines, principally owing to its strong implications for well-being of natives. The ageing population in many rich countries and several related and unrelated issues including global integration, pension provisions or security threats keeps immigration under continuous impact evaluation. However, of the several studies that dealt with patterns and consequences aspects of labor migration, only a handful discusses asymmetric information across transnational labor markets despite agreement that a standardized screening mechanism is unavailable. At the same time, several empirical studies show that immigrants are proportionally overrepresented in self-employment, vis-à-vis natives of equivalent skill levels. We try to explain this phenomenon based on asymmetric information in the host country labor market. We focus on the design of a contract menu by the employers, which when offered to a mixed cohort of immigrants facilitates self-selection in favor of paid employment or the outside option of self-employment/entrepreneurship. We also discuss countervailing incentives among the mixed cohort.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5508.

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Length: 37 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5508

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Keywords: immigrants; asymmetric information; labor contracts; self-employment; incentive compatibility;

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References

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  1. Rachel M. Friedberg, 1996. "You Can't Take It With You? Immigrant Assimilation and the Portability of Human Capital," NBER Working Papers 5837, National Bureau of Economic Research, Inc.
  2. Clark, Kenneth & Drinkwater, Stephen, 2000. "Pushed out or pulled in? Self-employment among ethnic minorities in England and Wales," Labour Economics, Elsevier, vol. 7(5), pages 603-628, September.
  3. Christian Dustmann & Francesca Fabbri & Ian Preston, 2005. "The Impact of Immigration on the British Labour Market," Economic Journal, Royal Economic Society, vol. 115(507), pages F324-F341, November.
  4. Chau, Nancy H & Stark, Oded, 1999. "Migration under Asymmetric Information and Human Capital Formation," Review of International Economics, Wiley Blackwell, vol. 7(3), pages 455-83, August.
  5. Constant, Amelie F. & Zimmermann, Klaus F., 2004. "The Making of Entrepreneurs in Germany: Are Native Men and Immigrants Alike?," IZA Discussion Papers 1440, Institute for the Study of Labor (IZA).
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Cited by:
  1. Kar, Saibal, 2009. "International labor migration, asymmetric information and occupational choice," MPRA Paper 24106, University Library of Munich, Germany.

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