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Formalized Employee Search and Labor Demand

Author

Listed:
  • Hensel, Lukas

    (Peking University)

  • Tekleselassie, Tsegay

    (Policy Studies Institute)

  • Witte, Marc

    (IZA)

Abstract

Firms often use social networks to find workers, limiting the pool of potential applicants. We conduct a field experiment subsidizing firms' formal vacancy posting. The subsidies increase non-network employee search and shift vacancies towards high-skilled positions. Post-treatment, firms continue searching for high-skilled workers despite reverting to network-based search. This change in skill requirements does not increase vacancy posting or hiring, suggesting substitutability between workers of different skill levels. Finally, we experimentally show that information asymmetries about applicants' skills do not limit firms' formal search. Our results highlight that exposure to different labor market segments can permanently change firms' labor demand.

Suggested Citation

  • Hensel, Lukas & Tekleselassie, Tsegay & Witte, Marc, 2021. "Formalized Employee Search and Labor Demand," IZA Discussion Papers 14839, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp14839
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    References listed on IDEAS

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    More about this item

    Keywords

    formalization; social networks; hiring; firms; field experiments;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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