Job Market Signalling of Relative Position, or Becker Married to Spence

We consider a matching model of the labour market where workers that differ in quality send signals to firms that are also vertically differentiated. Signals allow assortative matching in which the highest quality workers send the highest signals and are hired by the best firms. Matching is consider both when wages are fixed (non-transferable utility) and when they are fully flexible (utility is transferable). In both cases payoffs are determined by relative position - the best worker gets the best job. The standard signalling model which communicates the signaller’s absolute type is a special case of the current model of signalling relative position. Furthermore, in the relative model, equilibrium strategies and payoffs depend on the distributions of types of workers and the distribution of firms. This is in contrast with separating equilibria of the standard model which do not respond to changes in supply or demand. Despite incomplete information, equilibrium investment in education by low ability workers can be inefficiently low.Signalling, relative position, matching, tournaments.

Inequality and Risk-Taking Behaviour

This paper investigates social infuences on attitudes to risk and offers an evolutionary explanation of risk-taking by young low-ranked males. Becker, Murphy and Werning (2005) found that individuals about to participate in a status tournament may take fair gambles even though they are risk averse in both wealth and status. Here their model is generalised by use of the insight of Hopkins and Kornienko (2010) that in a tournament or status competition one can consider equality in terms of the status or rewards available as well as in initial endowments. While Becker et al. found that risk-taking is increasing in the equality of initial endowments, it is found here that it is increasing in the inequality of rewards in the tournament. Further, it is shown that the poorest will be risk loving if the lowest level of status awarded is su±ciently low. Thus, the disadvantaged in society rationally engage in risky behavior when social rewards are su±ciently unequal. Finally, as greater inequality in terms of social status induces gambling, it can cause greater inequality of wealth.risk, status, inequality.

Competitive Altruism, Mentalizing and Signalling

The human tendency to cooperate with nonkin even in short-run relationships remains a puzzle. Recently it has been hypothesized that altruism may be a byproduct of “mentalizing”, the process of understanding and predicting the mental states of others. Another idea is based on sexual selection: altruism is a costly signal of good genes. The paper shows that these two arguments are stronger when combined in that altruists who can mentalize have a greater advantage over non-altruists when they can signal their type, even though these signals are costly. Further, once such an equilibrium is established, altruists will not be supplanted by mutants who have similar mentalizing abilities but who lack altruism.altruism, sexual selection, mentalizing, social preferences, signalling, tournaments, evolution.

Inequality, Happiness and Relative Concerns: What Actually is their Relationship?

This paper briefly and informally surveys different theoretical models of relative concerns and their relation to inequality. Models of inequity aversion in common use in experimental economics imply a negative relation between inequality and happiness. In contrast, empirical studies on happiness typically employ models of relative concerns that assume that increases in others’ income always have a negative effect on own happiness. However, in these latter models, the relation between inequality and happiness can be positive. One possible solution is a rivalry model where a distinction is made between endowment and reward inequality which have respectively a negative and positive effect on happiness. These different models and their contrasting results may clarify why the empirical relationship between inequality and happiness has been difficult to establish.: inequality, relative position, social preferences, tournaments, evolution.