Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/122063
Authors: 
Ferreira, Daniel
Nikolowa, Radoslawa
Year of Publication: 
2015
Series/Report no.: 
Working Paper, School of Economics and Finance, Queen Mary, University of London 740
Abstract: 
We develop a model in which competition in the labor market may produce worker-firm matches that are inferior to those obtained in the absence of competition. This result contrasts with the conventional wisdom that competition among employers allocates scarce talent efficiently. In a model in which employers asymmetrically learn about the ability of their workers, we show that constraining labor market competition may be socially desirable precisely because it leads to better talent allocation. The model provides a cautionary counterpoint to one of the most popular arguments against the regulation of pay, i.e., the argument that price-distorting regulation leads to inefficient matches of workers and firms.
Subjects: 
Labor markets
Asymmetric employer learning
Misallocation
Adverse selection
JEL: 
D82
J31
M5
Document Type: 
Working Paper

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