Inefficient Hiring in Entry-Level Labor Markets
American Economic Review
vol. 104,
no. 11, November 2014
(pp. 3565-99)
Abstract
Hiring inexperienced workers generates information about their abilities. If this information is public, workers obtain its benefits. If workers cannot compensate firms for hiring them, firms will hire too few inexperienced workers. I determine the effects of hiring workers and revealing more information about their abilities through a field experiment in an online marketplace. I hired 952 randomly-selected workers, giving them either detailed or coarse public evaluations. Both hiring workers and providing more detailed evaluations substantially improved workers' subsequent employment outcomes. Under plausible assumptions, the experiment's market-level benefits exceeded its cost, suggesting that some experimental workers had been inefficiently unemployed.Citation
Pallais, Amanda. 2014. "Inefficient Hiring in Entry-Level Labor Markets." American Economic Review, 104 (11): 3565-99. DOI: 10.1257/aer.104.11.3565Additional Materials
JEL Classification
- J23 Labor Demand
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- M51 Personnel Economics: Firm Employment Decisions; Promotions