Job Mobility, Wage Dispersion, and Technological Chane: As Asymmetric Information Perspective
This paper develops a model of job mobility and wage dispersion. Worker ability affects both firm-specific and general productivity. Employers learn more about the abilities of their workers than do outside firms. The superior information of current employers creates a standard lemons problem in the second-hand labor market. Contrary to existing work, the lemons problem does not lead to market collapse in the model presented here. Instead, there exists a unique equilibrium outcome in which the current employer offers a wage equal to the average output of all types below the ability of the worker, and outside firms compete for workers by using mixed strategies. These mixed strategies lead to a non-degenerate wage distribution for all types of workers. This unique equilibrium outcome determines both the allocation of workers with heterogeneous abilities to different firms and also how wages change when workers change jobs. The model implies that, in the presence of technological change that is skill-biased and also favors general skills over firm-specific skills, the wage distribution will become more spread out (corresponding to greater inequality) and job mobility will increase. The model also suggests that the increase in job mobility should be larger for older workers. These patterns are consistent with recent empirical evidence on changes in job mobility in the United States. This model can be extended to study many labor market issues, including training, layoff rules, career choice, spillover effects, inter-industry wage differentials, and wage changes from job changes.
Li, Jin. 2013. Job Mobility, Wage Dispersion, and Technological Chane: As Asymmetric Information Perspective. European Economic Review. 60: 105-126.