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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
    DOI: 10.1086/684018
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    Cited by:

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    3. Rachel Scarfe & Carl Singleton & Adesola Sunmoni & Paul Telemo, 2022. "The Age-Wage-Productivity Puzzle: Evidence from the Careers of Top Earners," Economics Discussion Papers em-dp2022-07, Department of Economics, University of Reading.
    4. Adina D. Sterling & Roberto M. Fernandez, 2018. "Once in the Door: Gender, Tryouts, and the Initial Salaries of Managers," Management Science, INFORMS, vol. 64(11), pages 5444-5460, November.
    5. Laschever, Ron A. & Weinstein, Russell, 2021. "Preference Signaling and Worker-Firm Matching: Evidence from Interview Auctions," IZA Discussion Papers 14622, Institute of Labor Economics (IZA).
    6. Josephson, Jens & Shapiro, Joel, 2016. "Costly interviews," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 10-15.
    7. Chen, Bin R., 2015. "Subjective performance feedback, ability attribution, and renegotiation-proof contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 155-174.
    8. Daniel W. Elfenbein & Adina D. Sterling, 2018. "(When) Is Hiring Strategic? Human Capital Acquisition in the Age of Algorithms," Strategy Science, INFORMS, vol. 3(4), pages 668-682, December.
    9. Forsythe, Eliza & Weinstein, Russell, 2021. "Recruiting Intensity, Hires, and Vacancies: Evidence from Firm-Level Data," IZA Discussion Papers 14138, Institute of Labor Economics (IZA).

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    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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