Job market signaling of relative position, or Becker married to Spence

• Published in: Journal of the European Economic Association Vol. 10; no. 2; pp. 290 - 322
• Main Author: Hopkins, Ed
• Format: Journal Article
• Language: English
• Published: Malden, USA Wiley-Blackwell 01-04-2012; Blackwell Publishing Inc; Oxford University Press
• Subjects: Arbeitsmarkttheorie; Arbeitsplatzangebot; Arbeitsplatzsuchtheorie; Arbeitsuche; Arbeitsuchender; Bildung; Boundary conditions; C72; C78; Competition; D82; Differential equations; Economic competition; Economic equilibrium; Economic models; Economic theory; Employment; Financial investments; Imperfect information; Investition; Investment strategies; Labor economics; Labor markets; Labour market; Lohn; Lohnflexibilität; Market equilibrium; Matching; Signalling; Studies; Theorie; Unemployment; Wage theory; Wages; Wages & salaries; Wettbewerb; Workers
• ISSN: 1542-4766; 1542-4774; 1542-4774
• DOI: 10.1111/j.1542-4774.2010.01047.x

"This paper considers a matching model of the labor market where workers, who have private information on their quality, signal to firms that also differ in quality. Signals allow assortative matching in which the highest-quality workers send the highest signals and are hired by the best firms. Matching is considered both when wages are rigid (nontransferable utility) and when they are fully flexible (transferable utility). In both cases, equilibrium strategies and payoffs depend on the distributions of worker and firm types. This is in contrast to separating equilibria of the standard model, which do not respond to changes in supply or demand. With sticky wages, despite incomplete information, equilibrium investment in education by low-ability workers can be inefficiently low, and this distortion can become worse in a more competitive environment. In contrast, with flexible wages, greater competition improves efficiency." (Author's abstract, IAB-Doku). Forschungsmethode: Theoriebildung; Grundlagenforschung.