Job Market Signals and Signs

Universidad del CEMA Working Paper No. 326

39 Pages Posted: 28 Jun 2007

Date Written: August 2006

Abstract

What happens to job market signaling under two-dimensional asymmetric information? With 2 types of productivity and noise, the equilibrium remains separating if an extended single-crossing condition is satisfied. If not, there are partially pooling equilibria where only extreme types can be distinguished, and supplementary information is needed. On-the-job interaction gives employers private information on productivity, which employment relationships may reveal to the market. While sticky wages lead to public revelation of this private information through dismissals, flexible wages do not, allowing employers to do cream skimming. Beyond the 2x2 case, employment relationships are always a noisy sign, so education is valuable as a life-time job market signal for high-ability workers.

Keywords: two-dimensional asymmetric information, private information, informational rents, single-crossing, signals, signs

JEL Classification: J31, D10

Suggested Citation

Streb, Jorge Miguel, Job Market Signals and Signs (August 2006). Universidad del CEMA Working Paper No. 326, Available at SSRN: https://ssrn.com/abstract=996122 or http://dx.doi.org/10.2139/ssrn.996122

Jorge Miguel Streb (Contact Author)

Universidad del CEMA ( email )

Av. Cordoba 374
Buenos Aires, CABA
Argentina

HOME PAGE: http://www.ucema.edu.ar/u/jms/