Can Information Asymmetry Cause Stratification?
The empirical literature has found evidence of locational sorting of workers by wage or skill. We show that such sorting can be driven by asymmetric information in the labor market, specifically when firms do not know if a particular worker is of high or low skill. In a model with two types and two regions, workers of different skill levels are offered separating contracts in equilibrium. When mobile low skill worker population rises or there is technological change that favors high skilled workers, integration of both types of workers in the same region at equilibrium becomes unstable, whereas sorting of worker types into different regions in equilibrium remains stable. The instability of integrated equilibria results from firms, in the region to which workers are perturbed, offering attractive contracts to low skill workers when there is a mixture of workers in the region of origin.
|Date of creation:||12 Mar 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
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.:
- Robert M. Hunt, 2005. "A century of consumer credit reporting in America," Working Papers 05-13, Federal Reserve Bank of Philadelphia.
- Shin-Kun Peng & Ping Wang, 2005. "Sorting by foot: `travel-for' local public goods and equilibrium stratification," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1224-1252, November.
- Fujita, Masahisa & Mori, Tomoya, 1997. "Structural stability and evolution of urban systems," Regional Science and Urban Economics, Elsevier, vol. 27(4-5), pages 399-442, August.
- Valerie R. Bencivenga & Bruce D. Smith, 1995.
"Unemployment, migration, and growth,"
561, Federal Reserve Bank of Minneapolis.
- Krugman, Paul, 1991.
"Increasing Returns and Economic Geography,"
Journal of Political Economy,
University of Chicago Press, vol. 99(3), pages 483-99, June.
- Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
- Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
- Pierre-Philippe Combes & Gilles Duranton & Laurent Gobillon, 2008.
"Spatial Wage Disparities: Sorting Matters!,"
- Mori, Tomoya & Turrini, Alessandro, 2005.
"Skills, agglomeration and segmentation,"
European Economic Review,
Elsevier, vol. 49(1), pages 201-225, January.
- Tomoya Mori & Alessandro Turrini, 2000. "Skills, Agglomeration and Segmentation," Development Working Papers 141, Centro Studi Luca d'Agliano, University of Milano.
- Mori Mori, Tomoya & Turrini, Alessandro Antonio, 2000. "Skills, Agglomeration and Segmentation," CEPR Discussion Papers 2645, C.E.P.R. Discussion Papers.
- Hideo Konishi, 2006.
"Tiebout's Tale in Spatial Economies: Entrepreneurship, Self-Selection, and Efficiency,"
Boston College Working Papers in Economics
655, Boston College Department of Economics, revised 03 Jan 2008.
- Konishi, Hideo, 2008. "Tiebout's tale in spatial economies: Entrepreneurship, self-selection, and efficiency," Regional Science and Urban Economics, Elsevier, vol. 38(5), pages 461-477, September.
- Thomas. J. Nechyba, 1997.
"Existence of equilibrium and stratification in local and hierarchical Tiebout economies with property taxes and voting,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(2), pages 277-304.
- Thomas J. Nechyba, 1996. "Existence of Equilibrium and Stratification in Local and Hierarchical Tiebout Economies with Property Taxes and Voting," NBER Technical Working Papers 0190, National Bureau of Economic Research, Inc.
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, December.
- Daron Acemoglu, 1999.
"Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence,"
American Economic Review,
American Economic Association, vol. 89(5), pages 1259-1278, December.
- Daron Acemoglu, 1998. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," NBER Working Papers 6658, National Bureau of Economic Research, Inc.
- Acemoglu, D., 1996. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," Working papers 96-15, Massachusetts Institute of Technology (MIT), Department of Economics.
- Acemoglu, Daron, 1996. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," CEPR Discussion Papers 1459, C.E.P.R. Discussion Papers.
- Christopher R. Berry & Edward L. Glaeser, 2005. "The Divergence of Human Capital Levels Across Cities," NBER Working Papers 11617, National Bureau of Economic Research, Inc.
- Berry, Christopher R. & Glaeser, Edward L., 2005. "Divergence of Human Capital Levels across Cities," Working Paper Series rwp05-057, Harvard University, John F. Kennedy School of Government.
- John G. Riley, 1976.
UCLA Economics Working Papers
071, UCLA Department of Economics.
- Seade, J. K., 1977. "On the shape of optimal tax schedules," Journal of Public Economics, Elsevier, vol. 7(2), pages 203-235, April.
- Benabou, Roland, 1996. "Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance," American Economic Review, American Economic Association, vol. 86(3), pages 584-609, June.
- Roland Bénabou, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 237-264.
- Pedro Landeras & J. M. Pérez de Villarreal, 2005. "A Noisy Screening Model of Education," LABOUR, CEIS, vol. 19(1), pages 35-54, 03.
- Bayer, Patrick & Timmins, Christopher, 2005. "On the equilibrium properties of locational sorting models," Journal of Urban Economics, Elsevier, vol. 57(3), pages 462-477, May.
- Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
- Christopher R. Berry & Edward L. Glaeser, 2005. "The Divergence of Human Capital Levels across Cities," Harvard Institute of Economic Research Working Papers 2091, Harvard - Institute of Economic Research.
- Hanming Fang, 2001. "Social Culture and Economic Performance," American Economic Review, American Economic Association, vol. 91(4), pages 924-937, September.
- DeCoster Gregory P. & Strange William C., 1993. "Spurious Agglomeration," Journal of Urban Economics, Elsevier, vol. 33(3), pages 273-304, May.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:21395. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.