Abstract

In labor markets, employers and employers have to decide with whom to match. This decision has to me made under incomplete information: both sides do not know the characteristics of their potential partner since the relevant information – employees’ productivity and motivation at the one side and employers’ future behavior at the other – is private. Consequently, both sides try to deduce this knowledge from available Information. Whereas there is a huge literature on the role of occupational certificates and other signals for the employers’s decision, the basis of the employee’s choice is much less institutionalized. Often it is assumed that an employer’s reputation plays an important role to overcome the information problems on the employees’ side. However, our empirical knowledge about the extent of this mechanism as well as it’s specific determinants are still restricted. In this paper we deal with the questions whether employees use available information on the organization’s behavior in other fields to answer the question whether the firm will be a “good” employer. In other words, we ask whether firms can signal to be a good employer by investing in behavior observable to outsiders.