Information Frictions and Skill Signaling in the Youth Labor Market
This paper demonstrates that information frictions limit the labor market trajectories of young people in the U.S. We provide credible skill signals—recommendation letters based on supervisor feedback—to a random subset of 43,409 participants in New York City’s summer jobs program. Letters increase employment the following year by 3 percentage points (4.5 percent). Earnings effects grow over 4 years to a cumulative $1,349 (4.9 percent). We find no evidence of increased job search or confidence; instead, the signals help employers better identify successful matches with high-productivity workers. But the additional work hampers on-time high school graduation, especially among low-achieving students.
- Providing youths in a New York City summer jobs program with recommendation letters increased their subsequent employment and...