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Adverse selection, learning, and competitive search

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  • Mayr-Dorn, Karin

Abstract

I develop a dynamic version of the competitive search model with adverse selection in Guerrieri, Shimer and Wright (2010). My model allows for an analysis of the effects of firm learning on labor market efficiency in the presence of search frictions. I find that firm learning increases relative expected earnings in high-ability jobs and, thereby, enhances imitation incentives of low-ability workers. The net effect on the aggregate expected match surplus and unemployment is indeterminate a priori. Numerical results show that firm learning does not increase labor market efficiency.

Suggested Citation

  • Mayr-Dorn, Karin, 2020. "Adverse selection, learning, and competitive search," GLO Discussion Paper Series 700, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:700
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    More about this item

    Keywords

    job search; on-the-job effort; asymmetric information; learning;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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