Heterogeneity on both sides of the labor market implies that the correct matching of
individuals to firms is of importance. If there is uncertainty about individual productive
characteristics, there are both private and social returns to activities that generate
information facilitating the assortative matching process. A model of individual investment in
information is presented and analyzed. A key assumption is that there are no individuals
who have an absolute advantage in all jobs. Under this assumption, all individuals view …

ABSTRACT A simple life cycle model is developed wherein individuals devote current
potential market time to activities that provide imperfect but useful information on their
comparative advantage. Differences in technologies across firms provide the incentive for
this investment. A general model of an informational technology, firm behavior and
individual behavior is presented. A collection of restricted versions of the general model are
examined. These simpler models expose those features of an informational model that make …