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Choosing Workers' Qualifications: No Experience Necessary?

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  • Lewis, Tracy R
  • Sappington David E M

Abstract

We examine an employer's preferences regarding the education, prior experience, or training of the worker she hires. Although a worker's education may be observable, his productivity on the job is often privately observed. Higher levels of education increase the chances that the worker will have high productivity on the job. The employer's preferences are shown to depend critically on the nature of the adverse selection problem she faces: high levels of education are favored for workers with idiosyncratic skills, while low levels of education are preferred for versatile workers, whose skills are transferable. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Lewis, Tracy R & Sappington David E M, 1993. "Choosing Workers' Qualifications: No Experience Necessary?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 479-502, August.
    • Handle: RePEc:ier:iecrev:v:34:y:1993:i:3:p:479-502
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    Cited by:

    1. Isabelle Brocas, 2005. "Multistage Contracting with Applications to R&D and Insurance Policies," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(2), pages 317-346, May.
    2. Susanne Ohlendorf & Patrick W. Schmitz, 2012. "Repeated Moral Hazard And Contracts With Memory: The Case Of Risk‐Neutrality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 433-452, May.
    3. Cremer, Jacques & Khalil, Fahad & Rochet, Jean-Charles, 1998. "Strategic Information Gathering before a Contract Is Offered," Journal of Economic Theory, Elsevier, vol. 81(1), pages 163-200, July.
    4. Carrillo, Juan D., 1998. "Coordination and Externalities," Journal of Economic Theory, Elsevier, vol. 78(1), pages 103-129, January.
    5. Schmitz, Patrick W. & Ohlendorf, Susanne, 2008. "Repeated Moral Hazard, Limited Liability, and Renegotiation," CEPR Discussion Papers 6725, C.E.P.R. Discussion Papers.
    6. Arya, Anil & Mittendorf, Brian, 2005. "Offering stock options to gauge managerial talent," Journal of Accounting and Economics, Elsevier, vol. 40(1-3), pages 189-210, December.

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