ABSTRACT – This paper contributes to the empirical literature on asymmetric information in the labor market. In particular we claim that the standard empirical test on the existence and the effects on wages of such market imperfection is misspecied. The reason is that firm effects on wages are neglected in the standard analysis, while there are empirical evidences conrming the relevance of such effect. We rely on a rich matched employer-employee database to propose an improvement in the identication strategy encompassing time-varying firm effects on wages. We also propose an extension of Gibbons and Katz (1991) theoretical framework encompassing this effect.

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