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Exploration for Human Capital: Evidence from the MBA Labor Market

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  • Camelia M. Kuhnen
  • Paul Oyer

Abstract

We empirically investigate the effect of uncertainty on corporate hiring. Using novel data from the labor market for MBA graduates, we show that uncertainty regarding how well job candidates fit with a firm's industry hinders hiring and that firms value probationary work arrangements that provide the option to learn more about potential full-time employees. The detrimental effect of uncertainty on hiring is more pronounced when firms face greater firing and replacement costs and when they face less direct competition from other similar firms. These results suggest that firms faced with uncertainty use similar considerations when making hiring decisions as when making decisions regarding investment in physical capital.

Suggested Citation

  • Camelia M. Kuhnen & Paul Oyer, 2016. "Exploration for Human Capital: Evidence from the MBA Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 34(S2), pages 255-286.
  • Handle: RePEc:ucp:jlabec:doi:10.1086/684018
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    References listed on IDEAS

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    Cited by:

    1. Weinstein, Russell, 2018. "Employer screening costs, recruiting strategies, and labor market outcomes: An equilibrium analysis of on-campus recruiting," Labour Economics, Elsevier, vol. 55(C), pages 282-299.
    2. Josephson, Jens & Shapiro, Joel, 2016. "Costly interviews," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 10-15.

    More about this item

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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