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Up-or-Out Contracts: A Signaling Perspective

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  • Waldman, Michael

Abstract

A firm will typically gather information concerning its own workers that is not available to other potential employers, while other firms will attempt to reduce this information asymmetry by observing the actions of the initial employer. The author argues that this process can be important in environments characterized by up-or-out contracts in that the retentions decision can serve as a signal of productivity. The article investigates this argument in an environment where in-or-out contracts are employed because they provide workers with an incentive to accumulate general human capital and where learning takes place in a diffuse fashion. Copyright 1990 by University of Chicago Press.

Suggested Citation

  • Waldman, Michael, 1990. "Up-or-Out Contracts: A Signaling Perspective," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 230-250, April.
  • Handle: RePEc:ucp:jlabec:v:8:y:1990:i:2:p:230-50
    DOI: 10.1086/298221
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    References listed on IDEAS

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    1. Novos, I.E., 1988. "Worker Preferences And Firm Structure," Papers m8821, Southern California - Department of Economics.
    2. repec:ucp:bknber:9780226726281 is not listed on IDEAS
    3. Paul Milgrom & Sharon Oster, 1987. "Job Discrimination, Market Forces, and the Invisibility Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 102(3), pages 453-476.
    4. Kahn, Charles & Huberman, Gur, 1988. "Two-sided Uncertainty and "Up-or-Out" Contracts," Journal of Labor Economics, University of Chicago Press, vol. 6(4), pages 423-444, October.
    5. Edward P. Lazear, 1984. "Raids and Offermatching," NBER Working Papers 1419, National Bureau of Economic Research, Inc.
    6. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-461, June.
    7. MacDonald, Glenn M, 1982. "A Market Equilibrium Theory of Job Assignment and Sequential Accumulation of Information," American Economic Review, American Economic Association, vol. 72(5), pages 1038-1055, December.
    8. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
    9. Ricart i Costa, Joan E, 1988. "Managerial Task Assignment and Promotions," Econometrica, Econometric Society, vol. 56(2), pages 449-466, March.
    10. Milton Harris & Bengt Holmstrom, 1981. "A Theory of Wage Dynamics," Discussion Papers 488, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    11. Milton Harris & Bengt Holmstrom, 1982. "A Theory of Wage Dynamics," Review of Economic Studies, Oxford University Press, vol. 49(3), pages 315-333.
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