Excessive Labour Raiding

Labour raiding refers to firms recruiting and hiring employed workers. The literature on labour raiding supports the idea that raiding sorts workers into their most productive positions. I present a model where an outside firm decides whether or not to pay to learn the match‐quality of an employed worker and the employer decides whether or not to pay its worker a high wage that pre‐empts the raiding. I show that the employer may pay a low wage and gamble that it will not be raided rather than use a pre‐emptive wage. This leads to an excessive amount of raiding.