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Employee Investment and Screening based on Labor Force Attachment

Author

Listed:
  • Atsuko Tanaka

    (University of Calgary)

  • Hsuan-chih Lin

    (Academia Sinica)

Abstract

This paper studies firms' employee investment decisions based on labor force attachment under a screening model. We first characterize the conditions for pooling/separating equilibria and analyze the associated inefficiency. We find that strengthening the worker's labor force attachment does not always improve social welfare because it may lead to over-investment. The implications help us better understand the contributing factors to the gender wage gap since average job turnover rate is higher among women than men.

Suggested Citation

  • Atsuko Tanaka & Hsuan-chih Lin, 2020. "Employee Investment and Screening based on Labor Force Attachment," Economics Bulletin, AccessEcon, vol. 40(2), pages 1349-1356.
    • Handle: RePEc:ebl:ecbull:eb-19-00660
    as

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    References listed on IDEAS

    as
    1. Edward P. Lazear, 2009. "Firm-Specific Human Capital: A Skill-Weights Approach," Journal of Political Economy, University of Chicago Press, vol. 117(5), pages 914-940, October.
    2. George-Levi Gayle & Limor Golan, 2012. "Estimating a Dynamic Adverse-Selection Model: Labour-Force Experience and the Changing Gender Earnings Gap 1968--1997," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(1), pages 227-267.
    3. Manove, Michael & Padilla, A Jorge & Pagano, Marco, 2001. "Collateral versus Project Screening: A Model of Lazy Banks," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 726-744, Winter.
    4. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 629-649.
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    More about this item

    Keywords

    Labor Force Attachment; Screening Mechanism; Wage Contracts; Employee Training;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J7 - Labor and Demographic Economics - - Labor Discrimination

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