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An Alternative to Signaling: Directed Search and Substitution †

An Alternative to Signaling: Directed Search and Substitution † Abstract This paper analyzes a labor market, where: workers can acquire an observable skill at no cost, firms differ in unobserved productivity, workers' skill and firms' productivity are substitutes, and firms' search is directed. The main result is that, if the entry cost of firms is small, no worker acquires the skill in the unique equilibrium. For intermediate entry costs, a positive measure of workers obtain the skill, and the number of skilled workers goes to one as entry costs become large. Welfare is highest when the entry cost is high. (JEL D21, D24, D82, D83, J24 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

An Alternative to Signaling: Directed Search and Substitution †

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Publisher
American Economic Association
Copyright
Copyright © 2016 by the American Economic Association
Subject
Articles
ISSN
1945-7685
eISSN
1945-7685
DOI
10.1257/mic.20150116
Publisher site
See Article on Publisher Site

Abstract

Abstract This paper analyzes a labor market, where: workers can acquire an observable skill at no cost, firms differ in unobserved productivity, workers' skill and firms' productivity are substitutes, and firms' search is directed. The main result is that, if the entry cost of firms is small, no worker acquires the skill in the unique equilibrium. For intermediate entry costs, a positive measure of workers obtain the skill, and the number of skilled workers goes to one as entry costs become large. Welfare is highest when the entry cost is high. (JEL D21, D24, D82, D83, J24 )

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: Nov 1, 2016

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