Screening ex-ante or screening on-the-job? The impact of the employment contract

This paper studies how employers collect information about the quality of workers. Two are the strategies: screening ex-ante, through the recruitment process, and monitoring new hires at work, or screening on-the-job. Using two datasets representative of workers in Great Britain, we provide empirical evidence that the optimal choice is related to the type of employment contract offered by the .rm. Our estimates show that temporary workers are associated with lower recruitment effort - in terms of lower cost and higher speed - and closer monitoring than permanent employees. But this relation depends crucially on the type of jobs. Differences in screening effort are substantial for low-level occupations, while the gap is marginal or not significant for high-skilled jobs.Fixed-term contracts, Recruitment, Monitoring

Can Risk Aversion Explain Schooling Attainments?: evidence from Italy

Using unique Italian panel data, in which individual differences in behavior toward risk are measured from answers to a lottery question, we investigate if (and to what extent) risk aversion can explain differences in schooling attainments. We formulate the schooling decision process as a reduced-form dynamic discrete choice. The model is estimated with a degree of flexibility virtually compatible with semi- parametric likelihood techniques. We analyze how grade transition from one level to the next varies with preference heterogeneity (risk aversion), parental human capital, socioeconomic variables and persistent unobserved (to the econometrician) heterogeneity. We present evidence that schooling attainments decrease with risk aversion, but despite a statistically significant effect, differences in attitudes toward risk account for a modest portion of the probability of entering higher education. Differences in ability(ies) and in parental human capital are much more important. in the most general version of the model, the likelihood function is the joint probability of schooling attainments, and post-schooling wealth and risk aversion.dynamic discrete choices ; education ; human capital ; risk aversion

Skill Acquisition, Incentive Contracts and Jobs: Labor Market Adjustment to Trade

This paper examines how global integration influences worker behavior regarding skill acquisition, as well as firm behavior regarding incentive contracts and occupational diversity. The approach integrates several key components of international trade and the wage distribution in developed countries: namely heterogeneous firms, trade in similar goods, and performance payments to workers that endogenously obtain different skill levels. Greater trading opportunities reduce aggregate prices, causing workers to experience a greater marginal utility derived from income, as well as the skills that aid them in fulfilling performance contracts. Firms respond to skill accumulation among the labor force by adjusting the provision of incentive contracts, and the types of jobs they offer. Labor market adjustment to trade liberalization is characterized by a more steep, but less extensive, provision of incentive contracts among the labor force; higher overall wage inequality exhibiting a U-shaped differential; and job polarization across skill-groups.Job Polarization, Performance Pay, Trade Adjustment