Follow up data: Firm growth and information frictions in the market for skills

Project Active from to Firms and Trade

There are many frictions that hinder efficient firm-worker matching in developing countries. This project explores how improved information through auditing may affect recruitment outcomes. Manipulating the information that firms have on applicants’ work experience and the knowledge about information firms’ possess to see how this impacts the behaviour of job seekers and employers.

Labour markets in developing countries experience many frictions that impair efficient firm-worker matching. Information frictions can hinder firms’ attempts to observe workers skills and productivity, spatial frictions can separate firms and workers, regulatory frictions can deter firms from hiring and gender identity norms can hurt some workers and firms.

We will explore how improved information through auditing may impact job search decisions and the quality of firm-job seeker matches. First, we will manipulate firms’ information about applicants’ past work experience and knowledge about information firms possess.

We will examine applicants’ investment decisions in the presence of information frictions over long term. Finally, we will observe high-frequency outcome data from both firms and work seekers.

Our interventions can help firms to identify the best-matched workers for their vacancies, increasing matches and firm productivity. This will be particularly important for small and new firms which can’t make costly investments in screening technology to help them grow and compete.

Another potential benefit would be expanding the pool of candidates available and discouraging network hiring, particularly benefitting women and job seekers on the margins who lack social networks in the labour market and help to reduce inequalities.

Our auditing study consists of two linked experiments designed to understand the extent of misreporting of work experience by applicants, whether auditing changes firms’ hiring behaviour and whether auditing increases applicants’ willingness to make costly human capital investments over time. On the jobseeker end the study manipulates the threat of audits facing jobseekers and examines the effect on their reporting behaviour. On the employer end we manipulate the audit status of firms and examine the effect on recruitment outcomes.