Wage Dispersion and Labor Turnover with Adverse Selection

We consider a model of on-the-job search where firms offer long-term wage contracts to workers of different ability. Firms do not observe worker ability upon hiring but learn it gradually over time. With sufficiently strong information frictions, low-wage firms offer separating contracts and hire all types of workers in equilibrium, whereas high-wage firms offer pooling contracts designed to retain high-ability workers only. Low-ability workers have higher turnover rates, they are more often employed in low-wage firms and face an earnings distribution with a higher frictional component. Furthermore, positive sorting obtains in equilibrium.adverse selection, on-the-job search, wage dispersion, sorting

Wage Dispersion and Labor Turnover with Adverse Selection

We consider a model of on-the-job search where firms offer long-term wage contracts to workers of different ability. Firms do not observe worker ability upon hiring but learn it gradually over time. With sufficiently strong information frictions, low-wage firms offer separating contracts and hire all types of workers in equilibrium, whereas high-wage firms offer pooling contracts designed to retain high-ability workers only. Low-ability workers have higher turnover rates, they are more often employed in low-wage firms and face an earnings distribution with a higher frictional component. Furthermore, positive sorting obtains in equilibrium.adverse selection, on-the-job search, wage dispersion, sorting

Wage Dispersion and Labour Turnover with Adverse Selection

We consider a model of on-the-job search where firms offer long-term wage contracts to workers of different ability. Firms do not observe worker ability upon hiring but learn it gradually over time. With sufficiently strong information frictions, low-wage firms offer separating contracts and hire all types of workers in equilibrium, whereas high-wage firms offer pooling contracts designed to retain high-ability workers only. Low-ability workers have higher turnover rates, they are more often employed in low-wage firms and face an earnings distribution with a higher frictional component. Furthermore, positive sorting obtains in equilibrium.Adverse Selection, On-the-job Search, Wage Dispersion, Sorting

Essays in Problems of Optimal Sequential Decisions

In this dissertation, we study several Markovian problems of optimal sequential decisions by focusing on research questions that are driven by probabilistic and operations-management considerations. Our probabilistic interest is in understanding the distribution of the total reward that one obtains when implementing a policy that maximizes its expected value. With this respect, we study the sequential selection of unimodal and alternating subsequences from a random sample, and we prove accurate bounds for the expected values and exact asymptotics. In the unimodal problem, we also note that the variance of the optimal total reward can be bounded in terms of its expected value. This fact then motivates a much broader analysis that characterizes a class of Markov decision problems that share this important property. In the alternating subsequence problem, we also outline how one could be able to prove a Central Limit Theorem for the number of alternating selections in a finite random sample, as the size of the sample grows to infinity. Our operations-management interest is in studying the interaction of on-the-job learning and learning-by-doing in a workforce-related problem. Specifically, we study the sequential hiring and retention of heterogeneous workers who learn over time. We model the hiring and retention problem as a Bayesian infinite-armed bandit, and we characterize the optimal policy in detail. Through an extensive set of numerical examples, we gain insights into the managerial nature of the problem, and we demonstrate that the value of active monitoring and screening of employees can be substantial

Social Preferences, Skill Segregation and Wage Dynamics

We study the earning structure and the equilibrium asignment of workers to firms in a model in which workers have social preferences, and skills are perfectly substitutable in production. Firms offer long-term contracts, and we allow for frictions in the labour market in the form of mobility costs. The model delivers specific predictions about the nature of worker flows, about the characteristic of workplace skill segregation, and about wage dispersion both within and cross firms. We shows that long-term contracts in the resence of social preferences associate within-firm wage dispersion with novel "internal labour market" features such as gradual promotions, productivity-unrelated wage increases, and downward wage flexibility. These three dynamic features lead to productivity-unrelated wage volatily within firms.Publicad

A Voucher Supplement To Existing Anti-Discrimination Programs In The Job Market

This paper draws on literatures on vouchers and discrimination, and derives an optimal voucher scheme as a supplement to standard anti-discrimination policies, including affirmative action. Surveying current policy methods, it compares efficiency and distributional effects of vouchers to those of the standard enforcement policies. The motivation for vouchers is based on efficiency, equity, and on observed divergence of racial unemployment rates combined with convergence of wage rates.

Monetary Persistence and the Labor Market: A New Perspective

In this paper we propose a novel way to model the labor market in the context of a New-Keynesian general equilibrium model, incorporating labor market frictions in the form of hiring and firing costs. We show that such a model is able to replicate many important stylized facts of the business cycle. The reactions to monetary and real shocks become much more sluggish. Job creation and job destruction are negatively correlated. And the volatility of unemployment is much larger than in the standard search and matching model.monetary persistence, labor market, hiring and firing costs

Macroeconomic Volatilities and the Labor Market: First Results from the Euro Experiment

This paper analyzes the effects of different labor market institutions on inflation and output volatility. The eurozone offers an unprecedented experiment for this exercise: since 1999, no national monetary policies have been implemented that could account for volatility differences across member states, but labor market characteristics have remained very diverse. We use a New Keynesian model with unemployment to predict the effects of different labor market institutions on macroeconomic volatilities. In our subsequent empirical estimations, we find that higher labor turnover costs have a statistically significant negative effect on output volatility, while replacement rates have a positive effect, both of which are in line with theory. While labor market institutions have a large effect on output volatility, they do not seem to have much of an effect on inflation volatility, which can also be rationalized by our theoretical model.eurozone, unemployment, labor market institutions, output and inflation volatility, labor turnover costs, unemployment benefits

Disobedience and Authority

This paper presents a theory of the allocation of authority in an organization in which centralization is limited by the agent's ability to disobey the principal. We show that workers are given more authority when they are costly to replace or do not mind looking for another job, even if they have no better information than the principal. The allocation of authority thus depends on external market conditions as well as the information and agency problems emphasized in the literature. Evidence from a national survey of organizations shows that worker autonomy is related to separation costs as the theory predicts.Delegation, Authority, Separation Costs, Optimal employment contracts