Suppose you invented a test that can easily measure worker productivity in Spence's signaling model. Who would be interested in paying for the test?
Would workers pay to take it?
Would firms pay to be able to administer it?
One way for the firm to ‘‘test'' workers is to have an initial probationary period during which it observes workers' productivity and fires them or adjusts their wages according to how the workers perform.
What affect would this strategy have on the return to education? Can you think of realworld markets in which firms use such strategies?