Career Concerns and Optimal Disclosure Policy

When a worker is raided, his initial employer is often better informed about his quality than the raiders. If the worker has career concerns and matching influence productivity, the initial employer can strategically disclose this information to influence incentives and matching efficiency. If the initial employer can use long-term complete contracts, perfect competition in the raider market ensures full disclosure. In contrast, an optimal short-term contract induces full disclosure if i) worker is risk neutral, ii) worker does not face any liquidity constraints, and iii) raider market is perfectly competitive. By relaxing any of the above conditions, one can find situations where full disclosure is no longer optimal