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journal contribution
posted on 1977-12-01, 00:00 authored by Limor GolanThis paper considers the effect of offer matching on labor market outcomes
when the current employer has better information about his
worker’s productivity than potential employers. Previous research
found that when current employers have better information than potential
employers, the later use job assignment to infer an employed
worker’s qualifications. As a result, assignment of workers to jobs is
inefficient. I find that when current employers can match outside offers
the equilibrium outcome may be efficient despite the asymmetric
information. I then analyze the effect of the asymmetric information
on investment in human capital made by employers and workers, and
find these investment levels to be first best.