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Wage Signaling: A Dynamic Model Of Intrafirm Bargaining And Asymmetric Learning

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  • Limor Golan

Abstract

The article analyzes the effect of employer-worker bargaining on wage dynamics in the presence of asymmetric information between current and potential employers. A failure to reach an agreement leads to output loss. Because the disagreement points depend upon the worker's productivity, productive workers separate themselves from less productive workers and signal their ability through wages. In existing models of asymmetric learning, wages are attached to publicly observable characteristics and wage growth occurs only when there is a change in observable characteristics. This model, in contrast, generates an increase in earnings dispersion in cohorts of workers with similar observable characteristics. Copyright © (2009) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Limor Golan, 2009. "Wage Signaling: A Dynamic Model Of Intrafirm Bargaining And Asymmetric Learning," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 831-854, August.
  • Handle: RePEc:ier:iecrev:v:50:y:2009:i:3:p:831-854
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    Cited by:

    1. Feng, Shuaizhang & Zheng, Bingyong, 2010. "Imperfect Information, On-the-Job Training, and the Employer Size-Wage Puzzle: Theory and Evidence," IZA Discussion Papers 4998, Institute for the Study of Labor (IZA).

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