This paper analyzes a sorting model of labor contracts when workers have private information about their own productivities, and firms can test (monitor) workers. We show that sorting considerations alone generate steep wage-tenure profiles, high turnover rates of newly hired workers, and...

This paper presents a signaling explanation for unemployment. The basic idea is that employment at an unskilled job may be regarded as a bad signal. Therefore, good workers who are more likely to qualify for employment at a skilled job in the future are better off being unemployed than accepting...

This paper analyzes a sorting model of labor contracts when workers have private information about their own productivities, and firms can test (monitor) workers. We show that sorting considerations alone generate steep wage-tenure profiles, high turnover rates of newly hired workers, and...