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A Test of Adverse Selection in the Market for Experienced Workers

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  • Kevin Lang
  • Russell Weinstein

Abstract

We show that in labor market models with adverse selection, otherwise observationally equivalent workers will experience less wage growth following a period in which they change jobs than following a period in which they do not. We find little or no evidence to support this prediction. In most specifications the coefficient has the opposite sign, sometimes statistically significantly so. When consistent with the prediction, the estimated effects are small and statistically insignificant. We consistently reject large effects in the predicted direction. We argue informally that our results are also problematic for a broader class of models of competitive labor markets.

Suggested Citation

  • Kevin Lang & Russell Weinstein, 2016. "A Test of Adverse Selection in the Market for Experienced Workers," NBER Working Papers 22387, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22387
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    References listed on IDEAS

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    Cited by:

    1. Heski Bar‐Isaac & Clare Leaver, 2022. "Training, Recruitment, and Outplacement as Endogenous Adverse Selection," Economica, London School of Economics and Political Science, vol. 89(356), pages 849-861, October.
    2. Heski Bar-Isaac & Ian Jewitt & Clare Leaver, 2021. "Adverse selection, efficiency and the structure of information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(2), pages 579-614, September.
    3. Weinstein, Russell, 2017. "University Selectivity, Initial Job Quality, and Longer-Run Salary," IZA Discussion Papers 10911, Institute of Labor Economics (IZA).

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    JEL classification:

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

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