IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2509.25054.html
   My bibliography  Save this paper

Signaling in the Age of AI: Evidence from Cover Letters

Author

Listed:
  • Jingyi Cui
  • Gabriel Dias
  • Justin Ye

Abstract

We study the impact of generative AI on labor market signaling using the introduction of an AI-powered cover letter writing tool on a large online labor platform. Our data track both access to the tool and usage at the application level. Difference-in-differences estimates show that access to the tool increased textual alignment between cover letters and job posts and raised callback rates. Time spent editing AI-generated cover letter drafts is positively correlated with hiring success. After the tool's introduction, the correlation between cover letters' textual alignment and callbacks fell by 51%, consistent with what theory predicts if the AI technology reduces the signal content of cover letters. In response, employers shifted toward alternative signals, including workers' prior work histories.

Suggested Citation

  • Jingyi Cui & Gabriel Dias & Justin Ye, 2025. "Signaling in the Age of AI: Evidence from Cover Letters," Papers 2509.25054, arXiv.org, revised Nov 2025.
    • Handle: RePEc:arx:papers:2509.25054
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2509.25054
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John J. Horton, 2019. "Buyer Uncertainty About Seller Capacity: Causes, Consequences, and a Partial Solution," Management Science, INFORMS, vol. 65(8), pages 3518-3540, August.
    2. Ajay K. Agrawal & Joshua S. Gans & Avi Goldfarb, 2021. "AI Adoption and System-Wide Change," NBER Working Papers 28811, National Bureau of Economic Research, Inc.
    3. Marianne Bertrand & Sendhil Mullainathan, 2004. "Are Emily and Greg More Employable Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination," American Economic Review, American Economic Association, vol. 94(4), pages 991-1013, September.
    4. Ryan Allen & Prithwiraj (Raj) Choudhury, 2022. "Algorithm-Augmented Work and Domain Experience: The Countervailing Forces of Ability and Aversion," Organization Science, INFORMS, vol. 33(1), pages 149-169, January.
    5. Christopher T. Stanton & Catherine Thomas, 2020. "The Gig Economy Beyond Local Services and Transportation," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 21(03), pages 21-26, September.
    6. Emma van Inwegen & Zanele Munyikwa & John J. Horton, 2023. "Algorithmic Writing Assistance on Jobseekers' Resumes Increases Hires," Papers 2301.08083, arXiv.org.
    7. Nikhil Agarwal & Alex Moehring & Pranav Rajpurkar & Tobias Salz, 2023. "Combining Human Expertise with Artificial Intelligence: Experimental Evidence from Radiology," NBER Working Papers 31422, National Bureau of Economic Research, Inc.
    8. Emma Wiles & Zanele T. Munyikwa & John J. Horton, 2023. "Algorithmic Writing Assistance on Jobseekers’ Resumes Increases Hires," NBER Working Papers 30886, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Avi Goldfarb, 2024. "Pause artificial intelligence research? Understanding AI policy challenges," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(2), pages 363-377, May.
    2. Fazio, Maria Victoria & Freund, Richard & Novella, Rafael, 2025. "Do entrepreneurial skills unlock opportunities for online freelancing? Experimental evidence from El Salvador," Journal of Development Economics, Elsevier, vol. 172(C).
    3. Xiang Hui & Oren Reshef & Luofeng Zhou, 2023. "The Short-Term Effects of Generative Artificial Intelligence on Employment: Evidence from an Online Labor Market," CESifo Working Paper Series 10601, CESifo.
    4. Timm Teubner & Christoph M. Flath & Christof Weinhardt & Wil Aalst & Oliver Hinz, 2023. "Welcome to the Era of ChatGPT et al," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 65(2), pages 95-101, April.
    5. repec:osf:osfxxx:hdjpk_v1 is not listed on IDEAS
    6. Enrique Ide, 2025. "Automation, AI, and the Intergenerational Transmission of Knowledge," Papers 2507.16078, arXiv.org, revised Oct 2025.
    7. Chowdhury, Shyamal & Ooi, Evarn & Slonim, Robert, 2017. "Racial discrimination and white first name adoption: a field experiment in the Australian labour market," Working Papers 2017-15, University of Sydney, School of Economics.
    8. Mujcic, Redzo & Frijters, Paul, 2013. "Still Not Allowed on the Bus: It Matters If You're Black or White!," IZA Discussion Papers 7300, Institute of Labor Economics (IZA).
    9. Jonas Radbruch & Amelie Schiprowski, 2025. "Interview Sequences and the Formation of Subjective Assessments," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 92(2), pages 1226-1256.
    10. Anthony Edo & Nicolas Jacquemet & Constantine Yannelis, 2019. "Language skills and homophilous hiring discrimination: Evidence from gender and racially differentiated applications," Review of Economics of the Household, Springer, vol. 17(1), pages 349-376, March.
    11. Kevin Lang & Ariella Kahn-Lang Spitzer, 2020. "Race Discrimination: An Economic Perspective," Journal of Economic Perspectives, American Economic Association, vol. 34(2), pages 68-89, Spring.
    12. Keith Head & Thierry Mayer, 2008. "Detection Of Local Interactions From The Spatial Pattern Of Names In France," Journal of Regional Science, Wiley Blackwell, vol. 48(1), pages 67-95, February.
    13. David H Chae & Sean Clouston & Mark L Hatzenbuehler & Michael R Kramer & Hannah L F Cooper & Sacoby M Wilson & Seth I Stephens-Davidowitz & Robert S Gold & Bruce G Link, 2015. "Association between an Internet-Based Measure of Area Racism and Black Mortality," PLOS ONE, Public Library of Science, vol. 10(4), pages 1-12, April.
    14. Elizabeth Hirsh & Hazel Hollingdale & Natasha Stecy-Hildebrandt, 2013. "Gender inequality in the workplace," Chapters, in: Deborah M. Figart & Tonia L. Warnecke (ed.), Handbook of Research on Gender and Economic Life, chapter 12, pages 183-199, Edward Elgar Publishing.
    15. Saugato Datta & Vikram Pathania, 2016. "For whom does the phone (not) ring? Discrimination in the rental housing market in Delhi, India," WIDER Working Paper Series 055, World Institute for Development Economic Research (UNU-WIDER).
    16. Kelley Sarussi & Thomas Walstrum, 2019. "Education and the Evolution of Earnings Across Population Groups Since 2000," Profitwise, Federal Reserve Bank of Chicago, issue 5, pages 1-13.
    17. Ritwik Banerjee & Nabanita Datta Gupta, 2015. "Awareness Programs and Change in Taste-Based Caste Prejudice," PLOS ONE, Public Library of Science, vol. 10(4), pages 1-17, April.
    18. Bertrand, Jérémie & Burietz, Aurore, 2023. "(Loan) price and (loan officer) prejudice," Journal of Economic Behavior & Organization, Elsevier, vol. 210(C), pages 26-42.
    19. Jan Hanousek & Štěpán Jurajda, 2018. "Názvy společností a jejich vliv na výkonnost firem [Corporate Names and Performance]," Politická ekonomie, Prague University of Economics and Business, vol. 2018(6), pages 671-688.
    20. Bryson, Alex & Chevalier, Arnaud, 2015. "Is there a taste for racial discrimination amongst employers?," Labour Economics, Elsevier, vol. 34(C), pages 51-63.
    21. Bethany Everett & David Rehkopf & Richard Rogers, 2013. "The Nonlinear Relationship Between Education and Mortality: An Examination of Cohort, Race/Ethnic, and Gender Differences," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 32(6), pages 893-917, December.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2509.25054. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.