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Interviews and Adverse Selection

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  • Josephson, Jens
  • Shapiro, Joel

Abstract

Interviewing in professional labour markets is a costly process for firms. Moreover, poor screening can have a persistent negative impact on firms' bottom lines and candidates' careers. In a simple dynamic model where firms can pay a cost to interview applicants who have private information about their own ability, potentially large inefficiencies arise from information-based unemployment, where able workers are rejected by firms because of their lack of offers in previous interviews. This effect may make the market less efficient than random matching. We show that the first best can be achieved using either a mechanism with transfers or one without transfers.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6837.

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Date of creation: May 2008
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Handle: RePEc:cpr:ceprdp:6837

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Related research

Keywords: Asymmetric Information; Decentralized Labour Markets; Interview costs; Matching; Professional Labour Markets;

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References

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  1. Henry S. Farber & Robert Gibbons, 1997. "Learning and Wage Dynamics," NBER Working Papers 3764, National Bureau of Economic Research, Inc.
  2. Li, Hao & Rosen, Sherwin, 1998. "Unraveling in Matching Markets," American Economic Review, American Economic Association, vol. 88(3), pages 371-87, June.
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  4. Josephson, Jens & Shapiro, Joel, 2008. "Interviews and Adverse Selection," CEPR Discussion Papers 6837, C.E.P.R. Discussion Papers.
  5. Kahn, Lisa B., 2010. "The long-term labor market consequences of graduating from college in a bad economy," Labour Economics, Elsevier, vol. 17(2), pages 303-316, April.
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  15. Wing Suen, 2000. "A Competitive Theory of Equilibrium and Disequilibrium Unravelling in Two-Sided Matching," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 101-120, Spring.
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Cited by:
  1. Jens Josephson & Joel Shapiro, 2008. "Interviews and adverse selection," Economics Working Papers 1093, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Robin S. Lee & Michael Schwarz, 2009. "Interviewing in Two-Sided Matching Markets," NBER Working Papers 14922, National Bureau of Economic Research, Inc.

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