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Inefficient Hiring in Entry-Level Labor Markets

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  • Amanda Pallais

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.

Suggested Citation

  • Amanda Pallais, 2014. "Inefficient Hiring in Entry-Level Labor Markets," American Economic Review, American Economic Association, vol. 104(11), pages 3565-3599, November.
    • Handle: RePEc:aea:aecrev:v:104:y:2014:i:11:p:3565-99
    Note: DOI: 10.1257/aer.104.11.3565
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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