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Employee Screening: Theory and Evidence

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Author Info
Fali Huang () (School of Economics, Singapore Management University)
Peter Cappelli () (The Wharton School, University of Pennsylvania)

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Abstract

Arguably the fundamental problem faced by employers is how to elicit effort from employees. Most models suggest that employers meet this challenge by monitoring employees carefully to prevent shirking. But there is another option that relies on heterogeneity across employees, and that is to screen job candidates to find workers with a stronger work ethic who require less monitoring. This should be especially useful in work systems where monitoring by supervisors is more difficult, such as teamwork systems. We analyze the relationship between screening and monitoring in the context of a principal-agent model and test the theoretical results using a national sample of U.S. establishments, which includes information on employee selection. We find that employers screen applicants more intensively for work ethic where they make greater use of systems such as teamwork where monitoring is more difficult. This screening is also associated with higher wages, as predicted by the theory: The synergies between reduced monitoring costs and high performance work systems enable the firm to pay higher wages to attract and retain such workers. Screening for other attributes, such as work experiences and academic performance, does not produce these results.

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Publisher Info
Paper provided by Singapore Management University, School of Economics in its series Working Papers with number 09-2007.

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Length: 31 pages
Date of creation: Sep 2007
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Publication status: Published in SMU Economics and Statistics Working Paper Series
Handle: RePEc:siu:wpaper:09-2007

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Related research
Keywords: Employee Screening; Monitoring; Work Ethic; High Performance Work Practices; Principal-Agent Model.;

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Find related papers by JEL classification:
M51 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Firm Employment Decisions; Promotions
M54 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Management
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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