We investigate the effect of employee heterogeneity on the incentive to put forth effort in a market-based tournament. Employers use the tournament's outcome to estimate employees' abilities and accordingly condition their wage offers. Employees put forth effort, because by doing so they...

Bulow and Levin (2006) provide a model to explain the equilibrium wage in a centralized matching market such as the National Resident Matching Program (NRMP). Their model predicts that the average wages is lower than in any competitive equilibrium. This paper considers an example that...

The paper studies how social job finding networks affect firms' selection of employees and the setting of entry wages. Our point of departure is the Montgomery (1991) model of employee referrals which suggests that it is optimal for firms to hire new workers through referrals from their most...

Variable pay not only creates a link between pay and performance but may also help firms in attracting the more productive employees (Lazear 1986, 2000). However, due to lack of natural data, empirical analyses of the relative importance of the selection and incentive effects of pay schemes are...

This paper studies how schooling admission tests affect economic performance in an economy where individuals are endowed with both academic and non academic abilities and both abilities matter for labor productivity. We develop a simple model with selective government held schools, where...