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Job Market Signaling and Employer Learning

  • Alós-Ferrer, Carlos

    ()

    (University of Konstanz)

  • Prat, Julien

    ()

    (CREST)

This paper extends the job market signaling model of Spence (1973) by allowing firms to learn the ability of their employees over time. Contrary to the model without employer learning, we find that the Intuitive Criterion does not always select a unique separating equilibrium. When the Intuitive Criterion bites and information is purely asymmetric, the separating level of education does not depend on the observability of workers’ types. On the other hand, when workers are also uncertain about their productivity, the separating level of education is ambiguously related to the speed of employer learning.

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File URL: http://ftp.iza.org/dp3285.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3285.

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Length: 31 pages
Date of creation: Jan 2008
Date of revision:
Publication status: published online in: Journal of Economic Theory, 2012, [In Press / Corrected Proof]
Handle: RePEc:iza:izadps:dp3285
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  1. Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, 03.
  2. Araújo, Aloísio Pessoa de & Moreira, Humberto Ataíde, 2000. "Adverse Selection Problems Without the Spence-Mirrlees Condition," Economics Working Papers (Ensaios Economicos da EPGE) 389, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  3. Wolpin, Kenneth I, 1977. "Education and Screening," American Economic Review, American Economic Association, vol. 67(5), pages 949-58, December.
  4. Gibbons, R. & Katz, L.F., 1989. "Layoffs And Lemons," Working papers 531, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Lange, Fabian & Topel, Robert, 2006. "The Social Value of Education and Human Capital," Handbook of the Economics of Education, Elsevier.
  6. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
  7. Carlos Alós-Ferrer & Klaus Ritzberger, 2005. "Trees and Extensive Forms," Vienna Economics Papers 0506, University of Vienna, Department of Economics.
  8. Banks, Jeffrey S & Sobel, Joel, 1987. "Equilibrium Selection in Signaling Games," Econometrica, Econometric Society, vol. 55(3), pages 647-61, May.
  9. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  10. Kohlberg, Elon & Mertens, Jean-Francois, 1986. "On the Strategic Stability of Equilibria," Econometrica, Econometric Society, vol. 54(5), pages 1003-37, September.
  11. Katz, Lawrence & Gibbons, Robert & Lemieux, Thomas & Parent, Daniel, 2005. "Comparative Advantage, Learning, and Sectoral Wage Determination," Scholarly Articles 2766651, Harvard University Department of Economics.
  12. Henry S. Farber & Robert Gibbons, 1994. "Learning and Wage Dynamics," Working Papers 707, Princeton University, Department of Economics, Industrial Relations Section..
  13. Joshua C. Pinkston, 2009. "A Model of Asymmetric Employer Learning with Testable Implications," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 367-394.
  14. Mark Voorneveld & Jörgen W. Weibull, 2011. "A Scent of Lemon—Seller Meets Buyer with a Noisy Quality Observation," Games, MDPI, Open Access Journal, vol. 2(1), pages 163-186, March.
  15. Mailath George J. & Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1993. "Belief-Based Refinements in Signalling Games," Journal of Economic Theory, Elsevier, vol. 60(2), pages 241-276, August.
  16. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 1-35.
  17. Steffen Habermalz, 2011. "The speed of employer learning and job market signalling revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 18(7), pages 607-610.
  18. Axel Anderson & Lones Smith, 2010. "Dynamic Matching and Evolving Reputations," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 3-29.
  19. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, March.
  20. Habermalz, Steffen, 2006. "The Speed of Employer Learning and Job Market Signaling Revisited," IZA Discussion Papers 2309, Institute for the Study of Labor (IZA).
  21. Nick Feltovich & Richmond Harbaugh & Ted To, 2002. "Too Cool for School? Signalling and Countersignalling," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 630-649, Winter.
  22. Joseph G. Altonji & Charles R. Pierret, 1997. "Employer learning and statistical discrimination," Working Paper Series, Macroeconomic Issues WP-97-11, Federal Reserve Bank of Chicago.
  23. Cho, In-Koo & Sobel, Joel, 1990. "Strategic stability and uniqueness in signaling games," Journal of Economic Theory, Elsevier, vol. 50(2), pages 381-413, April.
  24. Péter Eső & James Schummer, 2009. "Credible deviations from signaling equilibria," International Journal of Game Theory, Springer, vol. 38(3), pages 411-430, November.
  25. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  26. Heski Bar-Isaac, 2003. "Reputation and Survival: Learning in a Dynamic Signalling Model," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 231-251, 04.
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