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Job market signals and signs

  • Jorge M. Streb

What happens to job market signaling under two-dimensional asymmetric information? With 2 types of productivity and noise, the equilibrium remains separating if an extended single-crossing condition is satisfied. If not, there are partially pooling equilibria where only extreme types can be distinguished, and supplementary information is needed. On-the-job interaction gives employers private information on productivity, which employment relationships may reveal to the market. While sticky wages lead to public revelation of this private information through dismissals, flexible wages do not, allowing employers to do cream skimming. Beyond the 2x2 case, employment relationships are always a noisy sign, so education is valuable as a life-time job market signal for high-ability workers.

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Paper provided by Universidad del CEMA in its series CEMA Working Papers: Serie Documentos de Trabajo. with number 326.

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Length: 39 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:cem:doctra:326
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  1. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
  2. Peter Gottschalk, 2004. "Downward Nominal Wage Flexibility: Real or Measurement Error?," Boston College Working Papers in Economics 611, Boston College Department of Economics.
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  14. Spence, A. Michael, 2001. "Signaling in Retrospect and the Informational Structure of Markets," Nobel Prize in Economics documents 2001-6, Nobel Prize Committee.
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