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Information Frictions and Skill Signaling in the Youth Labor Market

Author

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  • Sara B. Heller
  • Judd B. Kessler

Abstract

This paper demonstrates that information frictions limit the labor market trajectories of young people in the U.S. We provide credible skill signals—recommendation letters based on supervisor feedback—to a random subset of 43,409 participants in New York City’s summer jobs program. Letters increase employment the following year by 3 percentage points (4.5 percent). Earnings effects grow over 4 years to a cumulative $1,349 (4.9 percent). We find no evidence of increased job search or confidence; instead, the signals help employers better identify successful matches with high-productivity workers. But the additional work hampers on-time high school graduation, especially among low-achieving students.

Suggested Citation

  • Sara B. Heller & Judd B. Kessler, 2021. "Information Frictions and Skill Signaling in the Youth Labor Market," NBER Working Papers 29579, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29579
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    Cited by:

    1. Busso, Matias & Montaño, Sebastián & Muñoz-Morales, Juan S., 2023. "Signaling Specific Skills and the Labor Market of College Graduates," IZA Discussion Papers 16449, Institute of Labor Economics (IZA).

    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy

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