Intrafirm information management and wage dynamics

Firms continually have to decide what information to transfer to what worke rs. Better informed workers produce more, but they also demand higher wages reflecting improved outside options. Generally, the firm is shown to gradu ally transfer information to its workers over their employment lives. Corre spondingly, the model can explain an upward sloping wage schedule or a retu rn to tenure. This paper specifically examines how the strategic informatio n transfer by the firm to its workers over their work lives reflects (i) th e rate of depreciation of the information after a quit if any, (ii) its ris k of obsolescence, and (iii) asymmetric information on the part of the work er regarding his outside options. Asymmetric information regarding outside options can explain that some workers leave the firm in mid-career. (C) 200 0 Elsevier Science B.V. All rights reserved.