Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86909
Authors: 
Berkhout, Peter
Hartog, Joop
van Ophem, Hans
Year of Publication: 
2009
Series/Report no.: 
Tinbergen Institute Discussion Paper 09-071/3
Abstract: 
Firms hiring fresh graduates face uncertainty on the future productivity of workers. Theory suggests that starting wages reflect this, with lower pay for greater uncertainty. We use the dispersion of exam grades within a field of education as an indicator of the unobserved heterogeneity that employers face. We find solid evidence that starting wages are lower if the variance of exam grades is higher and higher if the skew is higher: employers shift the cost of productivity risk to new hires, but pay for the opportunity to catch a really good worker. Estimating the extent of risk cost sharing between firm and worker shows that shifting to workers is larger in the market sector than in the public sector and diminishes with experience.
Subjects: 
wages
risk compensation
ability
incomplete information
JEL: 
J31
Document Type: 
Working Paper

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