This article analyzes a model in which information about a worker's ability is only directly revealed to the firm employing the worker; other firms, however, use the worker's job assignment as a signal of ability. Three results recur throughout the analysis. First, wage rates tend to be more closely associated with jobs than with ability levels. Second, there is frequently an inefficient assignment of workers to jobs (i.e., even when a firm has complete information about a worker's output). Third, the severity of this inefficiency tends to be negatively correlated with the level of firm-specific human capital in the economy.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Milton Harris & Bengt Holmstrom, 1981.
"A Theory of Wage Dynamics,"
Discussion Papers
488, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.