Career Concerns, Matching, and Optimal Disclosure Policy

Raiders may suffer from information disadvantage since the current employer is often better informed about his workers' quality. When workers have career concerns and matching influences productivity, the initial employer can strategically disclose information to influence incentives and matching efficiency. Long-term complete contracts induce full disclosure when raiders are perfectly competitive. The optimal short-term contract induces full disclosure if raiders are perfectly competitive, and the workers are risk neutral and are not liquidity constrained. These conditions are not only sufficient but also "almost necessary" for full disclosure. Partial disclosure may be optimal if any of these conditions is relaxed. Copyright © (2008) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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