Discretion in Hiring
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 only because they have superior private information.
We are grateful to Jason Abaluck, Ajay Agrawal, Ricardo Alonso, Pol Antras, Ian Ball, David Berger, Arthur Campbell, David Deming, Alex Frankel, Avi Goldfarb, Lawrence Katz, Harry Krashinsky, Peter Landry, Jin Li, Liz Lyons, Steve Malliaris, Mike Powell, Kathryn Shaw, Steve Tadelis, numerous seminar participants, and anonymous referees for helpful comments. We are grateful to the anonymous data provider for providing access to proprietary data. Ho man acknowledges financial support from the Social Science and Humanities Research Council of Canada. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Mitchell Hoffman & Lisa B Kahn & Danielle Li, 2018. "Discretion in Hiring*," The Quarterly Journal of Economics, vol 133(2), pages 765-800. citation courtesy of