Worker mobility in a search model with adverse selection

Carlos Carrillo-Tudela and Leo Kaas

Journal of Economic Theory, 2015, vol. 160, issue C, 340-386

Abstract: We analyze the effects of adverse selection on worker turnover and wage dynamics in a frictional labor market. We consider a model of on-the-job search where firms offer promotion wage contracts to workers of different abilities, which is unknown to firms at the hiring stage. With sufficiently strong information frictions, low-wage firms offer separating contracts and hire all types of workers in equilibrium, whereas high-wage firms offer pooling contracts, promoting high-ability workers only. Low-ability workers have higher turnover rates and are more often employed in low-wage firms. The model replicates the negative relationship between job-to-job transitions and wages observed in the U.S. labor market.

Keywords: Adverse selection; On-the-job search; Worker mobility; Wage dynamics (search for similar items in EconPapers)
JEL-codes: D82 J63 J64 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Worker Mobility in a Search Model with Adverse Selection (2015)
Working Paper: Worker Mobility in a Search Model with Adverse Selection (2015)
Working Paper: Worker Mobility in a Search Model with Adverse Selection (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:160:y:2015:i:c:p:340-386

DOI: 10.1016/j.jet.2015.10.003

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