Information Frictions in Hiring Decisions

Project Information

INASHI

Grant agreement ID: 101087581

DOI

10.3030/101087581

EC signature date 30 May 2023

Start date 1 October 2023

End date 30 September 2028

Funded under

• European Research Council (ERC)

Total cost

€ 1 746 614,00

EU contribution

€ 1 746 614,00

Coordinated by

GROUPE DES ECOLES NATIONALES D ECONOMIE ET STATISTIQUE
France

Periodic Reporting for period 1 - INASHI (Information Frictions in Hiring Decisions)

Reporting period: 2023-10-01 to 2026-03-31

Summary of the context and overall objectives of the project

Over the past decades, the internet has accelerated and intensified interactions between employers and workers, yet aggregate unemployment does not appear to have been significantly affected by this transformation. Two alternative explanations may account for this: either information frictions are not a first-order determinant of unemployment, or existing tools and institutions fail to facilitate truthful and effective communication between firms and workers. Employers—typically on the short side of the market—often find it difficult and costly to screen potential employees, suggesting the presence of substantial frictions on their side.
INASHI aims to develop theoretical frameworks and provide new empirical evidence regarding the remaining information imperfections in the labour market, their importance for aggregate unemployment and for unemployment among the most vulnerable segments of the labour force, and potential solutions to improve the recruitment process.
INASHI combines novel data on firms’ search behaviour on large online job boards with administrative data on vacancies, as well as administrative data on both workers and firms. It also leverages a series of randomised controlled trials to assess how the provision of new information to employers—whether about candidates or market characteristics—can support better hiring decisions, ultimately leading to higher aggregate recruitment and more productive matches.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

Providing employers with information about job seekers' skills, preferences, and expectations
- Within France Travail (the French Public Employment Service), we identified several services designed to assess the skills of unemployed job seekers. The most promising one is the Simulation-Based Hiring Method, which evaluates the skills of unemployed job seekers interested in a specific job. We determined that this service could serve as the basis for a randomised intervention, as envisioned in this project.
- We began analysing existing data at France Travail and initiated discussions with several key stakeholders regarding the intervention and evaluation. We concluded that it would first be necessary to deploy a proof-of-concept evaluation, which we have started to work on.

Providing employers with information about their own labour markets
- We collaborated with France Travail to carry out the evaluation of a novel intervention aimed at informing firms posting vacancies about the wage distribution in their labour market. We completed design work and preliminary tests, and the experiment was launched at full scale.
- We have also collaborated with the Arbeitsmarktservice (the Austrian Public Employment Service) to prepare a complementary experiment. Unlike the French intervention, which targets employers after they post a vacancy, this experiment aims to intervene before the job posting decision. An additional advantage of this design is the ability to administer a survey, which will help disentangle the mechanisms behind the intervention's impact. We have collected data necessary for building the intervention-on both the wages posted by firms and the wages actually paid when hiring-and have discussed the experiment's design with Arbeitsmarktservice.

What do employers value in vocationally trained job seekers?
- We deployed a correspondence study and have begun analysing the results. We expect to publish a working paper in a working paper series very soon.
- We have also begun designing the incentivised résumé rating and conducting pre-pilot activities.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

INASHI will first contribute to the literature by providing evidence about how firms react to information about their labour markets (market wages, or wages posted by other firms) and about candidates’ skills (certifications, beyond what is usually available in CVs).

INASHI also aims to contribute to the literature about the impact of training on employers. While there is a large body of literature evaluating training programmes, most of these evaluations rely on assumptions that are not particularly credible in this context. Some experimental evidence is available, but it is typically context-specific and focused on a limited number of occupations or geographic areas. The results of our correspondence study indicate that:
(i) employers value degrees acquired through vocational training almost as much as degrees obtained through initial education;
(ii) short training has no effect on the probability of being called back by an employer.