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“Your Ex Knows Best” - The Value of Reference Letters: Guest Post by Martin Abel

Development Impact Guest Blogger's picture

This is the first in our series of posts by Ph.D. students on the job market this year.
One of the key challenges of markets is to assess the quality of goods. A look at online dating websites – a market where information asymmetries loom particularly large - shows different ways in which people try to communicate that they are of “high quality”. A common strategy is to start your introduction with “My friends describe me as…” (to be followed by some glowing testimony “…smart, athletic, high-achieving – yet humble”). Why may this strategy not be effective? It raises questions about whether these friends are truthful and whether they have all the relevant information about your quality as a partner. The really interesting question you never see answered is: “How would your ex-partner describe you?”

My job market paper “The Value of Reference Letters”, coauthored with Rulof Burger (SU) and Patrizio Piraino (UCT), is about the challenges hiring firms face in identifying high-quality applicants. While the literature has largely focused on the role of friends and family members (Topa 2011, Beaman and Magruder 2012) in job referrals, we investigate whether information from ex-employers can facilitate the matching process. Specifically, we test the effect of a standardized reference letter asking previous employers to rate workers on a range of hard skills (e.g. numeracy, literacy) and soft skills (e.g. reliability, team ability).

Experimentally testing a Job Matching Service and explaining high educated unemployment in Jordan

David McKenzie's picture
In 2010, unemployment rates for Jordanian men and women between the ages of 22 to 26 with a post-secondary degree were 19 percent and 47 percent, respectively. The transition period from graduating university to stable employment for youth who do not immediately find a job is 33 months on average. This problem of educated unemployed is pervasive in many countries in MENA, and raises the question of why the labor market doesn’t clear for educated youth?