Catching hipos: screening, wages, and competing for a job

Abstract

In this paper, I study the wage a firm sets to attract high ability workers (hipos) in situations where people compete for a job. I show that the more people compete, the larger a firm’s incentives to sort high and low ability workers. Moreover, workers will signal their (high) ability in situations with many competitors only if a job offers a high enough wage. The main result, therefore, is that a firm sets higher wages, when more people compete.