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

  • 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, Institute for Strategy and Business Economics (ISU) 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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  16. 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.
  17. 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].
  18. 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 1147-58, December.
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  20. 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.
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  22. 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.
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