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Job Market Signaling and Employer Learning

  • Alós-Ferrer, Carlos


    (University of Konstanz)

  • Prat, Julien



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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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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  2. Lange, Fabian & Topel, Robert, 2006. "The Social Value of Education and Human Capital," Handbook of the Economics of Education, Elsevier.
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  8. E. Kohlberg & J.-F. Mertens, 1998. "On the Strategic Stability of Equilibria," Levine's Working Paper Archive 445, David K. Levine.
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  10. Péter Eső & James Schummer, 2009. "Credible deviations from signaling equilibria," International Journal of Game Theory, Springer, vol. 38(3), pages 411-430, November.
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  13. 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).
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  15. Alós-Ferrer, Carlos & Ritzberger, Klaus, 2008. "Trees and extensive forms," Journal of Economic Theory, Elsevier, vol. 143(1), pages 216-250, November.
  16. Heski Bar-Isaac, 2003. "Reputation and Survival: Learning in a Dynamic Signalling Model," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 231-251.
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  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. repec:oup:qjecon:v:111:y:1996:i:4:p:1007-47 is not listed on IDEAS
  20. 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.
  21. Wolpin, Kenneth I, 1977. "Education and Screening," American Economic Review, American Economic Association, vol. 67(5), pages 949-58, December.
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  24. Habermalz, Steffen, 2006. "The Speed of Employer Learning and Job Market Signaling Revisited," IZA Discussion Papers 2309, Institute for the Study of Labor (IZA).
  25. 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.
  26. 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.
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