ON THE INFORMATIONAL CONTENT OF WAGE OFFERS*

This article investigates signaling and screening roles of wage offers in a single-play matching model with two-sided unobservable characteristics. It generates the following predictions as matching equilibrium outcomes: (i) ‘‘good’ ’ jobs offer premia if ‘‘high-quality’ ’ worker population is large; (ii) ‘‘bad’ ’ jobs pay compensating differentials if the proportion of ‘‘good’ ’ jobs to ‘‘low-quality’ ’ workers is large; (iii) all firms may offer a pooling wage in markets dominated by ‘‘high-quality’ ’ workers and firms; or (iv) Gresham’s Law prevails: ‘‘good’ ’ types withdraw if ‘‘bad’ ’ types dominate the population. The screening/signaling motive thus has the potential of explaining a variety of wage patterns. 1