Discretion in Hiring
NBER Working Paper No. 21709
Job testing technologies enable firms to rely less on human judgement when making hiring decisions. Placing more weight on test scores may improve hiring decisions by reducing the influence of human bias or mistakes but may also lead firms to forgo the potentially valuable private information of their managers. We study the introduction of job testing across 15 firms employing low-skilled service sector workers. When faced with similar applicant pools, we find that managers who appear to hire against test recommendations end up with worse average hires. This suggests that managers often overrule test recommendations because they are biased or mistaken, not because they have superior private information. The firms in our setting may therefore be able to improve outcomes of hires by limiting managerial discretion and relying more on test recommendations.
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This paper was revised on April 14, 2016
Document Object Identifier (DOI): 10.3386/w21709