Referral and Job Performance: Evidence from the Ghana Colonial Army
As formalized by Montgomery (1991), referral by employees improves efficiency if the unobserved quality of a new worker is higher than that of unrefereed workers.� Using data compiled by army archives, we test whether the referral system in use in the British colonial army in Ghana served to improve the unobserved quality of new recruits.� We find that it did not: referred recruits were more likely than unreferred recruits to desert or be dismissed as 'inefficient' or 'unfit'.� We find instead evidence of referee opportunism.� The fact that referred recruits have better observed characteristics at the time of recruitment suggests that army recruiters may have been aware of this problem.
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