Search, Screening and Sorting

Abstract

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Labor Markets, Wage Inequality, and Hiring Selection

“…He thus focuses on the optimal level of education, considering that, on one hand education improves their prospects, but on the other, introduces a so-called "rat-race" among the workers, who acquire education just to move up in the ranking. Some have considered a ranking mechanism for hiring in a directed search approach, as for example Shimer (2005), Shi (2006) and more recently Fernández-Blanco and Preugschat (2018), who endogeneize the mechanism highlighted by Blanchard and Diamond (1994), Wolthoff (2017), andCai, Gautier, andWolthoff (2021). Wolthoff (2017) considers a framework in which ex ante homogeneous workers can send multiple applications to firms who decide on the level of wage to post, the hiring standard (a minimum threshold level of productivity) and recruiting intensity.…”

“…However, these papers do not take into account on-the-job search, nor do they analytically characterize the competitive equilibrium and the efficiency of the economy. Cai, Gautier, and Wolthoff (2021) develop a directed search model with two-sided heterogeneity to study the conditions for sorting in applications as well as matches.…”