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Wage Posting as a Positive Selection Device: Theory and Empirical Evidence

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  • Gartner, Hermann
  • Holzner, Christian

Abstract

We use the German Job Vacancy Survey to investigate whether firms are able to attract more suitable applicants by offering bargain wages rather than posting fixed wages. Contrary to the theoretical predictions provided by the literature, we find that the offer to bargain over pay decreases the share of suitable applicants. To explain these findings we develop a directed search model with asymmetric information about workers' types and incomplete contracts, which allows firms to condition their hiring decision on the match quality revealed at the job interview. We show that wage-posting and wage-bargaining firms coexist if pooling workers with different expected match quality is too costly for wage-posting firms and if the bargaining power is not too far away from satisfying the Hosios condition. In such an equilibrium wage-posting firms hire only workers with a high match quality and wage-bargaining firms hire workers with a high and a medium match quality.

Suggested Citation

  • Gartner, Hermann & Holzner, Christian, 2016. "Wage Posting as a Positive Selection Device: Theory and Empirical Evidence," VfS Annual Conference 2016 (Augsburg): Demographic Change 145819, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc16:145819
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    References listed on IDEAS

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    Cited by:

    1. Bauer, Anja & Lochner, Benjamin, 2020. "History dependence in wages and cyclical selection: Evidence from Germany," Labour Economics, Elsevier, vol. 67(C).
    2. Benjamin Lochner & Bastian Schulz, 2024. "Firm Productivity, Wages, and Sorting," Journal of Labor Economics, University of Chicago Press, vol. 42(1), pages 85-119.
    3. Stefano Banfi & Benjamín Villena-Roldán, 2019. "Do High-Wage Jobs Attract More Applicants? Directed Search Evidence from the Online Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 37(3), pages 715-746.
    4. Benjamin Lochner & Bastian Schulz, 2016. "Labor Market Sorting in Germany," CESifo Working Paper Series 6066, CESifo.
    5. Bossler, Mario & Gürtzgen, Nicole & Kubis, Alexander & Küfner, Benjamin & Lochner, Benjamin, 2020. "The IAB Job Vacancy Survey: design and research potential," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 54(1), pages 1-13.

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    More about this item

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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