Tasks and Types: An Application of Mechanism Design to Self-Selection in Labour Markets Giuseppe Porro Abstract. The Baron–Myerson (1982) regulatory mechanism is applied to the screening activity of a monopolist, who hires workers differentiated by quality and assigns them to different tasks. The employer charges a price to the workers for the screening service: necessary and sufficient conditions are provided for a self-selective price function to exist. It is shown that under the optimal price function tasks are assigned in such a way that workers’ effort is increasing in workers’ quality. It is not necessarily true, however, that the price function must be increasing in workers’ quality. A simple two-types model is provided, showing the same results. Also the extension of the model to a dynamic context and, particularly, the requirements of a credible pre-commitment available to the screener are discussed. 1. Introduction One of the most drastic simplifications in neoclassical models of the labour market is the description of workers as identical and perfectly substitute labour-force suppliers. Some extensions, without substantial changes, allow for workers exhibiting differences in productivity — because of “genetic” reasons or of different skills, gained by formal instruction or professional experience — provided that these differences are known and perfectly observable to all the economic agents on the labour market. 1 Allowing for these characteristics in labour-force — known by the workers but not by the firm and not perfectly observable, both Giuseppe Porro, Dipartimento di Scienze Economiche e Statistiche, Universit` a degli Studi di Trieste, Piazzale Europa 1, Trieste. E-mail: Giuseppepo@econ.univ.trieste.it Received on October 18, 1995 and approved by the Editorial Board on October 23, 1996. LABOUR 11 (2) 391–406 (1997) JEL D82; J41 © Fondazione Giacomo Brodolini and Blackwell Publishers Ltd 1997, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA.