In a world of uncertainty in which a worker's performance is variable over time and average performance is unknown when hiring, how will employers determine compensation? We develop a monitoring and signaling model where information is symmetric and parties are risk neutral. Monitoring costs...

Spillovers to productivity across workers may exist when workers produce in teams. Under certain conditions, these spillovers may cause a worker's marginal product to differ across different firms. In this case, market wages will tend to sort workers into firms in which their marginal...