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Title:Wage dispersion and labor turnover with adverse selection PDF Logo
Authors:Carrillo-Tudela, Carlos
Kaas, Leo
Issue Date:2011
Series/Report no.:CESifo working paper: Labour Markets 3562
Abstract:We consider a model of on-the-job search where firms offer long-term wage contracts to workers of different ability. Firms do not observe worker ability upon hiring but learn it gradually over time. With sufficiently strong information frictions, low-wage firms offer separating contracts and hire all types of workers in equilibrium, whereas high-wage firms offer pooling contracts designed to retain high-ability workers only. Low-ability workers have higher turnover rates, they are more often employed in low-wage firms and face an earnings distribution with a higher frictional component. Furthermore, positive sorting obtains in equilibrium.
Subjects:adverse selection
on-the-job search
wage dispersion
sorting
JEL:D82
J63
J64
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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