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Do High-Wage Jobs Attract more Applicants? Directed Search Evidence from the Online Labor Market

Author

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  • Stefano Banfi
  • Benjamín Villena-Roldán

Abstract

Are workers applying more to high-wage jobs? To what extent do job seekers guide their search using information posted by employers? In the theoretical literature, workers directing search to jobs offering higher wages has strong implications for labor market efficiency, but the evidence supporting this behavior is scarce and murky. We provide strong evidence of directed search in online job markets. We use a novel feature of our data: even if employers choose not to make offered wages visible for applicants, we observe them as econometricians. Estimates using only explicitly posted wages suffer from selection bias because job ads that post an explicit wage require significantly lower education and experience, and offer lower wages. We find significant evidence for directed search evidence when wages are not explicitly declared, suggesting that the text and requirements of the posted job ad tacitly convey wage information. Moreover, job ad requirements are closely aligned with their applicants' traits, in line with predictions of directed search models with heterogeneity. Our evidence suggests that job ads with hidden wages are noisy signals of a high expected wage, used to attract skilled applicants and to deter unskilled ones. JEL codes: J64, J22, J42, E24. Key words: Keywords: directed search, wage posting, online job board, segmentation.

Suggested Citation

  • Stefano Banfi & Benjamín Villena-Roldán, 2016. "Do High-Wage Jobs Attract more Applicants? Directed Search Evidence from the Online Labor Market," Documentos de Trabajo 327, Centro de Economía Aplicada, Universidad de Chile.
    • Handle: RePEc:edj:ceauch:327
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    More about this item

    Keywords

    keywords: directed search; wage posting; online job board; segmentation.;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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