Economics at your fingertips  

Learning-by-Employing: The Value of Commitment under Uncertainty

Braz Camargo () and Elena Pastorino ()

Journal of Labor Economics, 2016, vol. 34, issue 3, 581 - 620

Abstract: We analyze commitment to employment in an environment in which an infinitely lived firm faces a sequence of finitely lived workers who differ in their ability. A worker’s ability is initially unknown, and a worker’s effort affects how informative about ability the worker’s performance is. We show that equilibria display commitment to employment only when effort has a delayed impact on output. In this case, insurance against early termination encourages workers to exert effort, thus allowing the firm to better identify workers’ ability. Our results help explain the use of probationary appointments in environments in which workers’ ability is uncertain.

Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf) (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Learning-by-employing: the value of commitment under uncertainty (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

More articles in Journal of Labor Economics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

Page updated 2023-03-26
Handle: RePEc:ucp:jlabec:doi:10.1086/684852