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Education, Ranking, and Competition for Jobs

  • Moen, Espen R

I study workers' incentives to invest in general human capital (education) in the presence of search-induced unemployment. Workers queue for jobs, and firms prefer to hire the most productive applicants because of rent sharing. As a result, an unemployed worker's ranking relative to other job seekers will influence his job-finding rate. This creates a "rat race," where workers invest in education partly in order to achieve a better ranking. In equilibrium, identical workers may have incentives to diversify in terms of education, and the investments in education may exceed the socially optimal level. Copyright 1999 by University of Chicago Press.

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File URL: http://dx.doi.org/10.1086/209936
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 17 (1999)
Issue (Month): 4 (October)
Pages: 694-723

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Handle: RePEc:ucp:jlabec:v:17:y:1999:i:4:p:694-723
Contact details of provider: Web page: http://www.journals.uchicago.edu/JOLE/

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  1. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-37, September.
  2. Daron Acemoglu, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 779-804.
  3. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
  4. Giuseppe Bertola & Ricardo J. Caballero, 1993. "Cross Sectional Efficiency and Labor Hoarding in an Matching Model of Unemployment," NBER Working Papers 4472, National Bureau of Economic Research, Inc.
  5. Hall, Robert E., 1979. "A theory of the natural unemployment rate and the duration of employment," Journal of Monetary Economics, Elsevier, vol. 5(2), pages 153-169, April.
  6. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  7. George Akerlof, 1976. "The Economics of Caste and of the Rat Race and Other Woeful Tales," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 599-617.
  8. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
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