In this note we study (adverse) selection in a labour supply model where potential applicants are characterised by different vocational premiums and skills. We show how the composition of the pool of active workers changes as wage increases. Contrary to standard results, average productivity does not necessarily increase monotonically in the wage rate. We provide conditions such that a wage increase deteriorates either the average productivity or the average vocation of workers accepting the job. Our results are relevant to understand the potential impacts of a wage increase as a policy aimed at solving shortage in the market for nurses.
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Paper provided by CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY in its series CHILD Working Papers with number
wp18_09.
Find related papers by JEL classification: J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
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