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| Author: | Leppämäki, M. Mustonen, M. |
| Title: | Skill signalling with product market externality |
| Journal: | Economic Journal
2009 : JUL, VOL. 119:539 p. 1130-1142 |
| Index terms: | labour markets pay incentives products models |
| Language: | eng |
| Abstract: | It is proposed that signalling in professional labour markets creates product market externalities which affect wages, thereby establishing a link between the externality and signalling incentives. Due to signalling acitivity, a free substitute (negative externality) or complement (positive externality) good appears. For negative or mildly positive externalities, the standard result of signalling at the minimum level obtains. When the positive externality is sufficiently strong, separation occurs. Very strong positive externalities indicates the unique maximum pooling equilibrium. |
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