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Externalities in recruiting

Author

Listed:
  • Kräkel, Matthias
  • Szech, Nora
  • von Bieberstein, Frauke

Abstract

External recruiting at least weakly improves the quality of the pool of applicants, but the incentive implications are less clear. Using a contest model, this paper investigates the pure incentive effects of external recruiting. Our results show that if workers are heterogeneous, opening up a firm's career system may lead to a homogenization of the pool of contestants and thus encourage the firm's high-ability workers to exert more effort. If this positive effect outweighs the discouragement of low-ability workers, the firm will benefit from external recruiting. If, however, the discouragement effect dominates the homogenization effect, the firm should disregard external recruiting. In addition, product market competition may mean that opening up the career system becomes less attractive for a firm since it increases the incentives of its competitors’ workers and hence strengthens the competitors.

Suggested Citation

  • Kräkel, Matthias & Szech, Nora & von Bieberstein, Frauke, 2014. "Externalities in recruiting," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 123-135.
    • Handle: RePEc:eee:jeborg:v:107:y:2014:i:pa:p:123-135
    DOI: 10.1016/j.jebo.2014.08.008
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    More about this item

    Keywords

    Contest; Externalities; Recruiting; Wage policy;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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