Publication Type

Working Paper

Publication Date

12-2016

Abstract

We consider a model in which each worker endogenously selects his own type through aprivate investment decision and selects a public signal in the labor market. Signaling thencontributes to social welfare through its influence on the quality choice. We offer a rationalefor the argument that there are too many high-type workers from a welfare perspective,identifying circumstances under which separating equilibrium generates too many high-typeworkers while having to use the incentive-compatible signal and treat high-type workersdifferently in the market. The inefficiency can then be reduced in pooling equilibrium.

Discipline

Labor Economics

Research Areas

Applied Microeconomics

First Page

1

Last Page

24

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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