Information Frictions in Hiring Decisions

Introduction

Over the last decades, the internet has sped up and increased interactions between employers and workers, but aggregate unemployment does not seem to have been much impacted by this revolution. This could be because information frictions are not a first-order contributor to unemployment, or because current tools and institutions do not enable truthful and effective communication between firms and workers.

Problem Statement

Employers, who are often on the short side of the market, find it difficult and costly to screen potential employees.

Project Objectives

INASHI aims to provide:

1. Theoretical frameworks
2. New empirical evidence about:
   • The remaining information imperfections in the labour market
   • The importance of these imperfections to aggregate unemployment and unemployment of the most vulnerable segments of the labour market
   • Solutions to improve the recruiting process

Methodology

INASHI will combine:

• Novel data on how firms search for workers on large online job boards
• Administrative data on vacancies
• Matched employer-employee data

It will also leverage a series of randomized controlled trials to test how the provision of new information to employers, whether about candidates or about features of the market, helps them make better hiring decisions. This is expected to lead to:

• Higher aggregate hiring
• Higher-quality matches

Scope of Study

Three countries will be studied: Austria, France, and Sweden. This approach will ensure that INASHI provides evidence valid in a variety of contexts.