Heterogeneity, Selection and Labor Market Disparities

Gino Gancia and Alessandra Bonfiglioli
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Alessandra Bonfiglioli: Universitat Pompeu Fabra

No 637, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: We study the incentives to acquire skill in a model where heterogeneous firms and workers interact in a labor market characterized by matching frictions and costly screening. When effort in acquiring skill raises both the mean and the variance of the resulting ability distribution, multiple equilibria may arise. In the high-effort equilibrium, heterogeneity in ability is sufficiently large to induce firms to select the best workers, thereby confirming the belief that effort is important for finding good jobs. In the low-effort equilibrium, ability is not sufficiently dispersed to justify screening, thereby confirming the belief that effort is not so important. The model has implications for wage inequality, the distribution of firm characteristics, sorting patterns between firms and workers, and unemployment rates that can help explaining observed cross-country variation in socio-economic and labor market outcomes.

Date: 2014
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Heterogeneity, selection and labor market disparities (2019)
Working Paper: Heterogeneity, selection and labor market disparities (2018)
Working Paper: Heterogeneity, Selection and Labor Market Disparities (2015)
Working Paper: Heterogeneity, Selection and Labor Market Disparities (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:637

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