Research on Monday Rotterdam

Ricardo Alonso (London School of Economics, United Kingdom)
Monday, 12 February 2018

This paper studies employer recruitment and selection of job applicants when productivity is match-specific. Job seekers have private, noisy estimates of match value and firms perform noisy interviews. A job seeker’s application depends on her perceived hiring probability given hiring standards, while firms consider the applicant pool’s composition when setting hiring standards. Improvements in either the accuracy of job-seekers’ estimates of fit or in the accuracy of a firm’s selection process can lower profits when it dissuades applications. I show that firms shun perfect tests of fit and avoid advertising to poorly informed job seekers for fear of dissuading suitable job seekers from applying. The model explains the adoption of previously unused costless testing technologies as application costs fall (e.g., following a move to online applications).

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Keywords: hiring, recruitment, selection, employer testing.
JEL classifications: D82, L23