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- Title
Imperfect Information and Employment Variability: A Note.
- Authors
Garella, Paolo G.; Manasse, Paolo
- Abstract
The article presents a paper, which looks at the effects of the employers' uncertainty of hiring workers into monopolistic firms. When productivity is not observable, and cannot be conditioned upon, less-than-full information is shown to impart a downward bias to hiring across all states of nature. The reason is that the firm, by keeping employment lower than under full information, exploits its hiring decisions in order is shape the probability distribution of workers' types at the firm level. When firms can observe workers' productivity prior to hiring, wages are set in proportion to their productivity, so that different workers become equivalent from the firm point of view. When workers' productivity is not observable, however, the firm can exploit its employment decisions in order to shape the probability distribution of workers' types at the firm level, it turns out that, for this reason, less-than-full information on workers' productivity imparts a downward bias to hiring across all states of nature. While such `stabilization' policies have no role in the model, the analysis suggests that policies designed to improve the quality of information about employees or to make pay dependent upon ability may lead to higher employment.
- Subjects
EMPLOYEE selection; LABOR productivity; EMPLOYMENT; METHODOLOGY; HUMAN error; PRODUCTIVITY accounting
- Publication
Economica, 1996, Vol 63, Issue 249, p145
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2554639