Specific Information, General Information, and Employment Matches Under Uncertainty
NBER Working Paper No. 394
Employment matches under uncertainty are typically accompanied by opportunities for information acquisition. Workers can acquire specific information about productivity lotteries at the firm or general information affecting their probabilistic beliefs about work elsewhere. Enterprises can acquire specific information concerning the productivity of a particular worker or general information about different groups of workers in a production process. In all cases, the market equilibrium with flexible wages is efficient. Moreover, there is no opportunity for strategic behavior that would alter this result. Both forms of information are associated with rising earnings profiles over time, hut the steepness is greater in the general case. The negative turnover-wage relation is attributable in part to the lower match termination rate of workers with productive lob histories, who earn higher wages than their less productive counterparts. General information is associated with more termination of employment matches by employers and employees than is specific information. The implications of specific/general information for matching processes in many respects aralle1 the role of that distinction in human capital theory, strengthening the link between matching theories and earlier human capital analyses.
Published: Viscusi, W. Kip. "Employment Relationships with Joint Employer and Worker Experimentation." International Economic Review, Vol. 24, No.2, (1983), pp . 313-322.