Analysis On The "Adverse Selection" Problem Of The Labor Market In China

This article, on the basis of Akerlof's adverse selection theory, investigates into the problem due to nonsymmetrical information in the labor market. A counterfeit market, namely "lemon" market, can naturally decline to a certain extent due to the adverse selection mechanism. In order to solve the adverse selection problem, the "signaling" model of Spence and the "screening" model of Stiglitz are introduced in this thesis, together with the applications of them in the labor market.A simple model of the secondhand car market with quality uniformly distributed is posed in the second part of this paper. On the basis of it, we make an intensive study of the problem in the labor market due to adverse selection, especially in the recruitment and the labor union. In the signaling model, we consider separately the pooling equilibrium and the separating equilibrium, In view of the confused information in the job market, this paper applies the screening model to test the function of education used to identify employees.Against the "lemon" problem in the labor market, some measures are implemented, like building up the mechanism of credit, signal assistance, and so on. Reducing the nonsymmetrical information leads to a Pareto improvement in the labor market.