Job Market Signaling and Job Search
The high cost of searching for employers borne by prospective employees increases friction in the labor market and inhibits formation of efficient employer-employee relationships. It is conventionally agreed that mechanisms that reduce the search costs (e.g., internet portals for job search) lower unemployment and improve overall welfare. We demonstrate that a reduction of the search costs may have the converse effect. We show that in a signaling job market with random matching lower search costs lead to fewer employees willing to exert effort and, in a separating equilibrium, to more individuals opting to stay completely out of the job market and remain unemployed. Furthermore, we show that lower search costs not only deteriorate the market composition, but also impair efficiency by leading to more expensive signaling in a separating equilibrium.
|Date of creation:||Jul 2008|
|Date of revision:||Sep 2008|
|Note:||Under review in American Economic Review|
|Contact details of provider:|| Postal: Str. Dmytrivska, 92-94, 4th Floor, office 404, Kyiv, 01135|
Web page: http://www.kse.org.ua/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ariel Rubinstein, 2004.
"Dilemmas of an Economic Theorist,"
Econometric Society 2004 North American Summer Meetings
661, Econometric Society.
- Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
- Milgrom, Paul & Roberts, John, 1986.
"Price and Advertising Signals of Product Quality,"
Journal of Political Economy,
University of Chicago Press, vol. 94(4), pages 796-821, August.
- Noldeke, G. & Samuelson, L., 1996.
"A Dynamic Model of Equilibrium Selection in Signaling Markets,"
9518r, Wisconsin Madison - Social Systems.
- Noldeke, Georg & Samuelson, Larry, 1997. "A Dynamic Model of Equilibrium Selection in Signaling Markets," Journal of Economic Theory, Elsevier, vol. 73(1), pages 118-156, March.
- Noeldeke, Georg & Samuelson, Larry, 1996. "A Dynamic Model of Equilibrium Selection in Signaling Markets," Economics Series 27, Institute for Advanced Studies.
- Gerorg Nöldeke & Larry Samuelson, . "A Dynamic Model of Equilibrium Selection In Signaling Markets," ELSE working papers 038, ESRC Centre on Economics Learning and Social Evolution.
- Noldeke, G. & Samuelson, L., 1995. "A Dynamic Model of Equilibrium Selection in Signaling Markets," Working papers 9518, Wisconsin Madison - Social Systems.
- David Pearce & Ben Groom & Cameron Hepburn & Phoebe Koundouri, 2003. "Valuing the Future," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 4(2), pages 121-141, April.
- Dale Mortensen, 1984.
"Job Search and Labor Market Analysis,"
594, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Mortensen, Dale T, 1970. "Job Search, the Duration of Unemployment, and the Phillips Curve," American Economic Review, American Economic Association, vol. 60(5), pages 847-62, December.
- Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
- Kaya, Ayça, 2009.
"Repeated signaling games,"
Games and Economic Behavior,
Elsevier, vol. 66(2), pages 841-854, July.
- Gronau, Reuben, 1971. "Information and Frictional Unemployment," American Economic Review, American Economic Association, vol. 61(3), pages 290-301, June.
- Austen-Smith, David & Banks, Jeffrey S., 2000.
"Cheap Talk and Burned Money,"
Journal of Economic Theory,
Elsevier, vol. 91(1), pages 1-16, March.
- Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 347-68, September.
- J. J. McCall, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, Oxford University Press, vol. 84(1), pages 113-126.
- Spence, Michael, 1974. "Competitive and optimal responses to signals: An analysis of efficiency and distribution," Journal of Economic Theory, Elsevier, vol. 7(3), pages 296-332, March.
- Osipian, Ararat, 2007. "Higher education corruption in Ukraine as reflected in the nation’s media," MPRA Paper 8464, University Library of Munich, Germany.
- John G. Riley, 2001. "Silver Signals: Twenty-Five Years of Screening and Signaling," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 432-478, June.
- Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
- Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug..
- James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
- George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
When requesting a correction, please mention this item's handle: RePEc:kse:dpaper:10. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Iryna Sobetska)
If references are entirely missing, you can add them using this form.