Asymmetric Information in the Labor Market, Immigrants and Contract Menu

Saibal Kar () and Bibhas Saha

No 5508, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Immigrant workers and their labor force participation in host countries have received critical attention in all concerned disciplines, principally owing to its strong implications for well-being of natives. The ageing population in many rich countries and several related and unrelated issues including global integration, pension provisions or security threats keeps immigration under continuous impact evaluation. However, of the several studies that dealt with patterns and consequences aspects of labor migration, only a handful discusses asymmetric information across transnational labor markets despite agreement that a standardized screening mechanism is unavailable. At the same time, several empirical studies show that immigrants are proportionally overrepresented in self-employment, vis-à-vis natives of equivalent skill levels. We try to explain this phenomenon based on asymmetric information in the host country labor market. We focus on the design of a contract menu by the employers, which when offered to a mixed cohort of immigrants facilitates self-selection in favor of paid employment or the outside option of self-employment/entrepreneurship. We also discuss countervailing incentives among the mixed cohort.

Keywords: immigrants; asymmetric information; labor contracts; self-employment; incentive compatibility (search for similar items in EconPapers)
JEL-codes: D82 J23 J24 J41 J61 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2011-02
New Economics Papers: this item is included in nep-cta, nep-ent, nep-lab and nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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