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Asymmetric Information between Employers

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  • Lisa B. Kahn

Abstract

This study explores whether potential employers have the same information about worker ability as the incumbent firm. I develop a model of asymmetric learning that nests the symmetric learning case and allows the degree of asymmetry to vary. I then show how predictions in the model can be tested with compensation data. Using the NLSY, I test the model and find strong support for asymmetric information. My estimates imply that in one period, outside firms reduce the average expectation error over worker ability by only a third of the reduction made by incumbent firms.

Suggested Citation

  • Lisa B. Kahn, 2013. "Asymmetric Information between Employers," American Economic Journal: Applied Economics, American Economic Association, vol. 5(4), pages 165-205, October.
    • Handle: RePEc:aea:aejapp:v:5:y:2013:i:4:p:165-205
    Note: DOI: 10.1257/app.5.4.165
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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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    1. Asymmetric Information between Employers (American Economic Journal: Applied Economics 2013) in ReplicationWiki

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