Training, Recruitment, and Outplacement as Endogenous Adverse Selection

This paper presents a model of a competitive labour market where workers vary in firm-specific and general skills, and firms choose the kind of information to disclose. We show that provision of general training, recruitment, and outplacement are linked. Disclosing general human capital information on bad matches but revealing nothing about good matches (information disclosure that resembles outplacement support in professional service firms) leads to an efficient allocation of workers and creates adverse selection that enables workers to pay for general training. It also implies that wages of released workers can be higher than wages of those who are retained.