Logo
Munich Personal RePEc Archive

Risk and Unraveling in Labor Markets

Bos, Olivier and Ranger, Martin (2016): Risk and Unraveling in Labor Markets.

[thumbnail of MPRA_paper_74785.pdf]
Preview
PDF
MPRA_paper_74785.pdf

Download (480kB) | Preview

Abstract

A two period labor market is considered in which workers’ quality is revealed in the second period. A signal – revealed to either workers, firms or both at the beginning of the first period – is correlated with the final quality. Under all assumptions about the distribution of information in the first period there exists an equilibrium in which firms only make offers in the second period and workers accept no offer in the first period. Nonetheless, early contracting is also an equilibrium if certain conditions on preferences of firms and workers are met. Workers have to be risk averse or firms risk loving with respect to expectations appropriate to the relevant information structure. Thus the conditions for unraveling depend on the information available to the two sides of the market.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.