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Employers' hiring practices, employment protection, and costly search: A vacancy-level analysis

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  • Brencic, Vera

Abstract

An employer with a vacancy may respond to high search costs by lowering hiring requirements. While such an adjustment increases the employer's chances of filling the vacancy, it also more likely results in a match that terminates when the match is hit by match-specific productivity shocks. Drawing on a novel Slovenian vacancy dataset, we find that employers who are searching to fill temporary positions are more likely to hire underqualified workers when search costs are high. We find that search costs are taken into consideration when employers are searching to fill permanent positions in some specifications but not all. These findings suggest that for employers who are searching to fill a permanent position, the benefits of lowering hiring requirements when search costs are high are likely outweighed by: a) high firing costs if an under-qualified worker is hired on a permanent contract or b) the costs of undertaking a new search later if an under-qualified worker is hired on a temporary contract. These are novel findings about the employers' hiring practices in the presence of employment protection laws and costly search.

Suggested Citation

  • Brencic, Vera, 2009. "Employers' hiring practices, employment protection, and costly search: A vacancy-level analysis," Labour Economics, Elsevier, vol. 16(5), pages 461-479, October.
  • Handle: RePEc:eee:labeco:v:16:y:2009:i:5:p:461-479
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    References listed on IDEAS

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    Cited by:

    1. Oyer, Paul & Schaefer, Scott, 2011. "Personnel Economics: Hiring and Incentives," Handbook of Labor Economics, Elsevier.
    2. Brenzel, Hanna & Müller, Anne, 2015. "Higher wages or lower expectations? : adjustments of German firms in the hiring process," IAB Discussion Paper 201506, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. repec:eee:labeco:v:46:y:2017:i:c:p:118-130 is not listed on IDEAS
    4. Takuya Hasebe, 2011. "The Type of Contract and Starting Wage and Wage Growth: The Evidence from New Graduates from Post-Secondary Schools in the Netherlands," Working Papers 20, AlmaLaurea Inter-University Consortium.

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