Labor Market Signaling

There are various events that lead to an adjusted assessment of employee abilities in the labor market. Consider, e.g., a promotion, which can be regarded as a signal and in this way has information regarding worker abilities. We investigate different events that can serve as information signals to gain an understanding of the information transfer in the labor market and, on this basis, to be able to provide recommendations for action for companies and policy makers. For example, we can show that a worker's choice of a competitive firm (big pond) can be seen as a signal of high worker ability, even though (or because) the chances of promotion in such a firm are considerably lower than in a non-competitive firm. We analyze these issues both theoretically in equilibrium models and empirically, using data from European soccer leagues.