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A Model of Asymmetric Employer Learning With Testable Implications

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  • Joshua C. Pinkston

    () (U.S. Bureau of Labor Statistics)

Abstract

This paper develops and tests a unique model of asymmetric employer learning. The model relaxes the informational assumptions used in most of the previous literature and assumes firms compete for workers through bidding wars. As a result, outside firms can profitably compete for an employed worker who is equally productive in any firm, despite the current employer’s informational advantage. The model in this paper is the first in the literature to predict either wage growth without changes in publicly observed information (e.g., promotions) or mobility between firms without firm- or match-specific productivity. The bidding through which firms compete for a worker produces a sequence of wages that converges to the current employer’s conditional expectation of the worker’s productivity. This convergence of wages allows the model to be tested using an extension of previous work on employer learning. Wage regressions estimated on a sample of men from the NLSY produce evidence consistent with the model’s predictions.

Suggested Citation

  • Joshua C. Pinkston, 2006. "A Model of Asymmetric Employer Learning With Testable Implications," Working Papers 390, U.S. Bureau of Labor Statistics.
  • Handle: RePEc:bls:wpaper:ec060020
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    References listed on IDEAS

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    More about this item

    Keywords

    Asymmetric Employer Learning; Wage and Performance Relationship; Applications of Auction Theory;

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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