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We investigate whether an agency can increase employment by
strategically coarsening information provided to employers about
workers' skills. Theoretically, we find that such an increase is
possible under fixed wages, and a range of employment levels can
occur in equilibrium. We test this possibility using laboratory experiments under three conditions: full information, coarse and
verifiable information, and coarse but not verifiable information.
We find that, relative to full information, both coarse-information
treatments increase employment at the expense of employers' profits, but not to the highest theoretically achievable levels. We also
find that verifiability affects several aspects of behavior.
