Does Digitalization Increase Labor Market Efficiency? Job Search and Effort on the Job With Asymmetric Information and Firm Learning

Johannes Kepler University of Linz, Department of Economics, WP 1906, 2019

Posted: 27 Sep 2019

See all articles by Karin Mayr-Dorn

Karin Mayr-Dorn

Johannes Kepler University of Linz

Date Written: September 18, 2019

Abstract

This paper analyses the effect of firm learning on labor market efficiency in a frictional labor market with asymmetric information. I consider a model with random matching and wage bargaining a la Pissarides (1985, 2000) where worker ability is unknown to firms at the hiring stage. Firm learning increases relative expected earnings in high-ability jobs and, thereby, enhances imitation incentives of low-ability workers. The net effect on aggregate expected match surplus and unemployment is indeterminate a priori. Numerical results show that firm learning does not increase labor market efficiency.

Keywords: job search, on-the-job effort, asymmetric information, learning

JEL Classification: D82, D83, J64

Suggested Citation

Mayr-Dorn, Karin, Does Digitalization Increase Labor Market Efficiency? Job Search and Effort on the Job With Asymmetric Information and Firm Learning (September 18, 2019). Johannes Kepler University of Linz, Department of Economics, WP 1906, 2019, Available at SSRN: https://ssrn.com/abstract=3455899

Karin Mayr-Dorn (Contact Author)

Johannes Kepler University of Linz ( email )

Altenbergerstrasse 69
Linz, Upper Austria 4040
Austria

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