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Does digitalization increase labor market efficiency? Job search and effort on the job with asymmetric information and firm learning

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  • Karin Mayr-Dorn

Abstract

This paper analyses the effect of firm learning on labor market efficiency in a frictional labor market with asymmetric information. I consider a model with random matching and wage bargaining a la Pissarides (1985, 2000) where worker ability is unknown to firms at the hiring stage. Firm learning increases relative expected earnings in high-ability jobs and, thereby, enhances imitation incentives of low-ability workers. The net effect on aggregate expected match surplus and unemployment is indeterminate a priori. Numerical results show that firm learning does not increase labor market efficiency.

Suggested Citation

  • Karin Mayr-Dorn, 2019. "Does digitalization increase labor market efficiency? Job search and effort on the job with asymmetric information and firm learning," Economics working papers 2019-06, Department of Economics, Johannes Kepler University Linz, Austria.
    • Handle: RePEc:jku:econwp:2019_06
    Note: English
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    References listed on IDEAS

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    1. Moen, Espen R. & Rosén, Åsa, 2003. "Equilibrium Incentive Contracts," CEPR Discussion Papers 3790, C.E.P.R. Discussion Papers.
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    More about this item

    Keywords

    job search; on-the-job effort; asymmetric information; learning.;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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