Using panels of player pay and performance from Major League Baseball (MLB), we examine trends in player productivity and salaries as players age. Pooling players of all ability levels leads to a systematic bias in regression coefficients. After addressing this problem by dividing players into...

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...