Job market signaling with imperfect competition among employers

Abstract

This paper studies a job market signaling model with imperfect competition among employers. In our basic model, workers are differentiated in productivity and preference over employers, both of which are workers’ private information. We conclude that if competition is sufficiently strong, a separating equilibrium exists. We also show that stronger competition among employers intensifies competition between workers; workers invest more in costly education to get attractive jobs, and social welfare decreases. When employers can observe worker’s preferences, wage discrimination strengthens competition among employers and makes workers better off.