Asymmetric Information in the Labor Market, Immigrants and Contract Menu

37 Pages Posted: 21 Feb 2011

See all articles by Saibal Kar

Saibal Kar

Centre for Studies in Social Sciences, Calcutta; Institute of Labor Economics (IZA)

Bibhas Saha

University of East Anglia (UEA) - School of Economic and Social Studies

Date Written: February 1, 2011

Abstract

Immigrant workers and their labor force participation in host countries have received critical attention in all concerned disciplines, principally owing to its strong implications for well-being of natives. The aging population in many rich countries and several related and unrelated issues including global integration, pension provisions or security threats keeps immigration under continuous impact evaluation. However, of the several studies that dealt with patterns and consequences aspects of labor migration, only a handful discusses asymmetric information across transnational labor markets despite agreement that a standardized screening mechanism is unavailable. At the same time, several empirical studies show that immigrants are proportionally overrepresented in self-employment, vis-à-vis natives of equivalent skill levels. We try to explain this phenomenon based on asymmetric information in the host country labor market. We focus on the design of a contract menu by the employers, which when offered to a mixed cohort of immigrants facilitates self-selection in favor of paid employment or the outside option of self-employment/entrepreneurship. We also discuss countervailing incentives among the mixed cohort.

Keywords: immigrants, asymmetric information, labor contracts, self-employment, incentive compatibility

JEL Classification: D82, J23, J24, J41, J61

Suggested Citation

Kar, Saibal and Saha, Bibhas C., Asymmetric Information in the Labor Market, Immigrants and Contract Menu (February 1, 2011). IZA Discussion Paper No. 5508. Available at SSRN: https://ssrn.com/abstract=1765674

Saibal Kar (Contact Author)

Centre for Studies in Social Sciences, Calcutta ( email )

R-1, Baishnabghata Patuli Township
Calcutta, 700 094
India
91-33-2462 7252 (Phone)
91-33-2462 6183 (Fax)

HOME PAGE: http://www.cssscal.org

Institute of Labor Economics (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Bibhas C. Saha

University of East Anglia (UEA) - School of Economic and Social Studies ( email )

Norwich, Norfolk NR4 7TJ
United Kingdom
+44 0 1603 593404 (Phone)
+44 0 1603 456259 (Fax)

HOME PAGE: http://www.uea.ac.uk/eco/people/saha_b.htm

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