Adverse Selection when Jobs are Hard to Do

Anthony A. Sampson and Robert Simmons

Scottish Journal of Political Economy, 2000, vol. 47, issue 3, 325-336

Abstract: Privately observed ability increases output and reduces effort required to complete tasks, in a model where harder tasks produce more output. The relation between average quality of the workforce and the wage rate is ambiguous. The model also produces a rat‐race, in the sense that some individuals work harder than is socially optimal. This distortion can be corrected by a non‐linear tax.

Date: 2000
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