NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Inefficient Hiring in Entry-Level Labor Markets

Amanda Pallais

NBER Working Paper No. 18917
Issued in March 2013
NBER Program(s):   LS

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.

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Document Object Identifier (DOI): 10.3386/w18917

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