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
Date Written: September 18, 2019
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
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