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How Acid are Lemons? Adverse Selection and Signalling for Skilled Labour Market Entrants

Listed author(s):
  • Robert Wagner

    ()

    (Ludwig-Maximilians University, Munich)

  • Thomas Zwick

    ()

    (Ludwig-Maximilians University, Munich and Centre for European Economic Research, Mannheim)

This paper for the first time jointly analyses the consequences of adverse selection, signalling and indices on entry wages of skilled employees. It uses German linked employer employee panel data (LIAB) and introduces a measure for relative productivity of skilled job applicants based on apprenticeship wages. It shows that post-apprenticeship employer changers are a negative selection from the training firms’ point of view. Negative selection leads to lower average wages of employer changers in the first skilled job in comparison to stayers. Entry wages of employer changers are specifically reduced by high occupation and training firm retention rates. High apprenticeship wages signal a positive selection of apprenticeship applicants. Works councils and establishment size seem to be indices for good training quality. Finally, positive individual signals such as schooling background affect the skilled entry wages of employer changers positively.

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File URL: http://repec.business.uzh.ch/RePEc/iso/leadinghouse/0071_lhwpaper.pdf
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Paper provided by University of Zurich, Department of Business Administration (IBW) in its series Economics of Education Working Paper Series with number 0071.

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Length: 41 pages
Date of creation: Jan 2012
Date of revision: Feb 2012
Handle: RePEc:iso:educat:0071
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  1. Robert Gibbons & Lawrence F. Katz, 1989. "Layoffs and Lemons," Working Papers 629, Princeton University, Department of Economics, Industrial Relations Section..
  2. Lars Behrenz, 2001. "Who Gets The Job And Why? An Explorative Study Of Employers’ Recruitment Behavior," Journal of Applied Economics, Universidad del CEMA, vol. 4, pages 255-278, November.
  3. Pfeifer, Christian & Schneck, Stefan, 2010. "Relative Wage Positions and Quit Behavior: New Evidence from Linked Employer-Employee Data," Hannover Economic Papers (HEP) dp-438, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  4. Katz, Eliakim & Ziderman, Adrian, 1990. "Investment in General Training: The Role of Information and Labour Mobility," Economic Journal, Royal Economic Society, vol. 100(403), pages 1147-1158, December.
  5. Andrew Weiss, 1995. "Human Capital vs. Signalling Explanations of Wages," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 133-154, Fall.
  6. Acemoglu, Daron & Pischke, Jorn-Steffen, 2000. "Certification of training and training outcomes," European Economic Review, Elsevier, vol. 44(4-6), pages 917-927, May.
  7. Harhoff, Dietmar & Kane, Thomas J, 1996. "Is the German Apprenticeship System a Panacea for the US Labour Market?," CEPR Discussion Papers 1311, C.E.P.R. Discussion Papers.
  8. Jens Mohrenweiser & Thomas Zwick & Uschi Backes-Gellner, 2010. "Poaching And Firm Sponsored Training: First Clean Evidence," Economics of Education Working Paper Series 0051, University of Zurich, Department of Business Administration (IBW), revised May 2013.
  9. Iourii Manovskii & Gueorgui Kambourov, 2004. "Occupational Specificity of Human Capital," 2004 Meeting Papers 197, Society for Economic Dynamics.
  10. Jens Mohrenweiser & Thomas Zwick, 2008. "Why do Firms Train Apprentices? The Net Cost Puzzle Reconsidered," Economics of Education Working Paper Series 0016, University of Zurich, Department of Business Administration (IBW), revised Oct 2008.
  11. Christian Dustmann & Uta Schönberg, 2009. "Training and Union Wages," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 363-376, May.
  12. Eugene A. Kroch & Kriss Sjoblom, 1994. "Schooling as Human Capital or a Signal: Some Evidence," Journal of Human Resources, University of Wisconsin Press, vol. 29(1), pages 156-180.
  13. David Soskice, 1994. "Reconciling Markets and Institutions: The German Apprenticeship System," NBER Chapters, in: Training and the Private Sector: International Comparisons, pages 25-60 National Bureau of Economic Research, Inc.
  14. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
  15. Jacobebbinghaus, Peter & Alda, Holger, 2007. "LIAB-Datenhandbuch, Version 2.0 (LIAB Data Handbook Version 2.0)," FDZ Datenreport. Documentation on Labour Market Data 200702_de, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  16. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
  17. Derek Neal, 1998. "The Complexity of Job Mobility Among Young Men," NBER Working Papers 6662, National Bureau of Economic Research, Inc.
  18. Uta Schönberg, 2007. "Testing for Asymmetric Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 651-691.
  19. Kriechel, Ben & Mühlemann, Samuel & Pfeifer, Harald & Schuette, Miriam, 2012. "Works Councils, Collective Bargaining and Apprenticeship Training," IZA Discussion Papers 6497, Institute for the Study of Labor (IZA).
  20. Kahn, Lisa B., 2010. "The long-term labor market consequences of graduating from college in a bad economy," Labour Economics, Elsevier, vol. 17(2), pages 303-316, April.
  21. McLaughlin, Kenneth J, 1991. "A Theory of Quits and Layoffs with Efficient Turnover," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 1-29, February.
  22. Bruce C. Greenwald & Robert R. Glasspiegel, 1983. "Adverse Selection in the Market for Slaves: New Orleans, 1830–1860," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 479-499.
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