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- Title
FAVORABLE SELECTION WITH ASYMMETRIC INFORMATION.
- Authors
Jovanovic, Boyan
- Abstract
This article shows that once one abandons the assumption of hierarchical quality, the presence of uncertainty and asymmetric information may result in favorable selection rather than adverse selection. This point is made within the context of an elaboration of Roy's model of comparative advantage in the labor market. The practical importance of the study's results may be considerable. For if, as is often alleged, individuals' productivity in the more highly skilled sectors are harder to observe than in the less skilled sectors, the results suggest that too many people are going into the skilled occupations, so that the policies that subsidize education are leading us even farther away from the second-best optimum.
- Subjects
LABOR market; ECONOMIC equilibrium; SUPPLY-side economics; LABOR productivity; LABOR supply; ECONOMIC demand
- Publication
Quarterly Journal of Economics, 1982, Vol 97, Issue 3, p535
- ISSN
0033-5533
- Publication type
Article
- DOI
10.2307/1885876