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Worker Mobility in a Search Model with Adverse Selection

Author

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  • Carlos Carrillo-Tudela

    (University of Essex)

  • Leo Kaas

    (University of Konstanz)

Abstract

We analyze the effects of adverse selection on worker turnover and wage dynamics in a frictional labor market. We consider a model of on-the-job search where firms offer promotion wage contracts to workers of different ability, which is unknown to firms at the hiring stage. With sufficiently strong information frictions, low-wage firms offer separating contracts and hire all types of workers in equilibrium, whereas high-wage firms offer pooling contracts, promoting high-ability workers only. Low-ability workers have higher turnover rates and are more often employed in low-wage firms. The model replicates the negative relationship between job-to-job transitions and wages observed in the U.S. labor market.

Suggested Citation

  • Carlos Carrillo-Tudela & Leo Kaas, 2015. "Worker Mobility in a Search Model with Adverse Selection," Working Papers 2015-40, Peruvian Economic Association.
  • Handle: RePEc:apc:wpaper:2015-040
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Rao, Neel, 2016. "Asymmetric information and search frictions: A neutrality result," Economics Letters, Elsevier, vol. 147(C), pages 138-141.
    2. Carlos Carrillo-Tudela & Eric Smith, 2017. "Search Capital," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 23, pages 191-211, January.
    3. repec:eee:jetheo:v:174:y:2018:i:c:p:184-223 is not listed on IDEAS
    4. Hermann Gartner & PD Christian Holzner, 2015. "Wage Posting as a Positive Selection Device: Theory and Empirical Evidence," CESifo Working Paper Series 5494, CESifo Group Munich.

    More about this item

    Keywords

    Adverse Selection; On-the-job search; Worker mobility; Wage dynamics;

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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