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Learning by doing and adverse selection : the importance of commitment

Author

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  • Ian E. Novos

    (Georgia Insitute of Technology, Atlanta)

Abstract

The analysis in Novos (1990) is extended to incorporate a richer signalling dimension. Specifically, firms observe the evolving employment histories of workers. Results show, firstly, that when firms are not integrated across tasks there is an inefficient allocation of workers across tasks. Second, when firms are integrated across tasks workers are, ex-ante, efficiently allocated across tasks. Finally, when firm structure is an endogenous choice firms will choose to be integrated. A crucial role in the analysis is occupied by the idea ofa »promotion commitment.» The central role often played by personnel departments in this regard is discussed.

Suggested Citation

  • Ian E. Novos, 1992. "Learning by doing and adverse selection : the importance of commitment," Finnish Economic Papers, Finnish Economic Association, vol. 5(2), pages 79-90, Autumn.
    • Handle: RePEc:fep:journl:v:5:y:1992:i:2:p:79-90
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    File URL: http://taloustieteellinenyhdistys.fi/images/stories/fep/f1992_2a.pdf
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    References listed on IDEAS

    as
    1. Stephen Ross & Paul Taubman & Michael L. Wachter, 1981. "Learning by Observing and the Distribution of Wages," NBER Chapters, in: Studies in Labor Markets, pages 359-386, National Bureau of Economic Research, Inc.
    2. Novos, Ian E., 1992. "Learning by doing, adverse selection and firm structure," Journal of Economic Behavior & Organization, Elsevier, vol. 19(1), pages 17-39, September.
    3. MacLeod, W Bentley & Malcomson, James M, 1989. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Econometrica, Econometric Society, vol. 57(2), pages 447-480, March.
    4. Malcomson, James M, 1984. "Work Incentives, Hierarchy, and Internal Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 486-507, June.
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    3. Pedro Ortín‐Ángel & Vicente Salas‐Fumás, 2007. "Compensation Dispersion Between and Within Hierarchical Levels," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(1), pages 53-79, March.
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    More about this item

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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