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A Model of Asymmetric Employer Learning With Testable Implications

  • Joshua C. Pinkston

    ()

    (U.S. Bureau of Labor Statistics)

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.

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Paper provided by U.S. Bureau of Labor Statistics in its series Working Papers with number 390.

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Length: 51 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:bls:wpaper:ec060020
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  1. Uta Schönberg, 2007. "Testing for Asymmetric Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 651-691.
  2. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 921-55, November.
  3. Joseph Altonji & R. Shakotko, 1985. "Do Wages Rise with Job Seniority?," Working Papers 567, Princeton University, Department of Economics, Industrial Relations Section..
  4. James L. Medoff & Katharine G. Abraham, 1980. "Experience, Performance, and Earnings," NBER Working Papers 0278, National Bureau of Economic Research, Inc.
  5. Henry S. Farber & Robert Gibbons, 1994. "Learning and Wage Dynamics," Working Papers 707, Princeton University, Department of Economics, Industrial Relations Section..
  6. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Scoones, David & Bernhardt, Dan, 1998. "Promotion, Turnover, and Discretionary Human Capital Acquisition," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 122-41, January.
  8. Klemperer, Paul, 1999. " Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-86, July.
  9. Oettinger, Gerald S, 1996. "Statistical Discrimination and the Early Career Evolution of the Black-White Wage Gap," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 52-78, January.
  10. Paul R. Milgrom, 1984. "Job Discrimination, Market Forces and the Invisibility Hypothesis," Cowles Foundation Discussion Papers 708R, Cowles Foundation for Research in Economics, Yale University, revised 1985.
  11. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 989-1016, November.
  12. Gibbons, Robert & Katz, Lawrence F., 1991. "Layoffs and Lemons," Scholarly Articles 3442782, Harvard University Department of Economics.
  13. Michael Waldman, 1983. "Job Assignments, Signalling nad Efficiency," UCLA Economics Working Papers 286, UCLA Department of Economics.
  14. Pinkston, Joshua C., 2003. "Screening discrimination and the determinants of wages," Labour Economics, Elsevier, vol. 10(6), pages 643-658, December.
  15. Bernhardt, Dan, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 315-39, April.
  16. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority, and Earnings," NBER Working Papers 1819, National Bureau of Economic Research, Inc.
  17. Gibbons, Robert & Waldman, Michael, 1999. "Careers in organizations: Theory and evidence," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 36, pages 2373-2437 Elsevier.
  18. DeVaro, Jed & Waldman, Michael, 2006. "The signaling role of promotions: Further theory and empirical evidence," MPRA Paper 1550, University Library of Munich, Germany.
  19. James L. Medoff & Katharine G. Abraham, 1981. "Are Those Paid More Really More Productive? The Case of Experience," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 186-216.
  20. Paul Klemperer, 1997. "Auctions with Almost Common Values: The Wallet Game and its Applications," Economics Series Working Papers 1998-W03, University of Oxford, Department of Economics.
  21. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
  22. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Internal Economics of the Firm: Evidence from Personnel Data," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 881-919, November.
  23. Jovanovic, Boyan, 1984. "Matching, Turnover, and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 108-22, February.
  24. Edward P. Lazear, 1984. "Raids and Offermatching," NBER Working Papers 1419, National Bureau of Economic Research, Inc.
  25. Jan Eeckhout, 2004. "Employer Learning and General Human Capital," 2004 Meeting Papers 88, Society for Economic Dynamics.
  26. Bikhchandani, Sushil, 1988. "Reputation in repeated second-price auctions," Journal of Economic Theory, Elsevier, vol. 46(1), pages 97-119, October.
  27. Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-43, June.
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