A new approach for measuring wage ignorance in the labor market |
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| Authors: | Richard A. Hofler Solomon W. Polachek |
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| Affiliation: | 1. Assistant Professor of Economics, Stokely Management Center, University of Tennessee-Knoxville, USA;2. Professor of Economics, State University of New York, Binghamton, USA |
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| Abstract: | In this article we offer a new econometric approach to the evaluation of information content within labor markets. We define ignorance as the difference between the wage (price) individuals earn (pay) with full information and the wage (price) they actually receive (pay) given their limited information stocks, and we make use of a frontier production function approach to measure ignorance for various markets. Our empirical results are highly consistent with the analytical results in six areas of search theory. Furthermore, our results suggest a new interpretation of the role of unions. |
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| Keywords: | Address reprint requests to Professor Richard A. Hofler Department of Economics Stokely Management Center The University of Tennessee-Knoxville Knoxville TN 37796 USA |
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