Externalities in recruiting

Matthias Kräkel, Nora Szech and Frauke von Bieberstein

Journal of Economic Behavior & Organization, 2014, vol. 107, issue PA, 123-135

Abstract: External recruiting at least weakly improves the quality of the pool of applicants, but the incentive implications are less clear. Using a contest model, this paper investigates the pure incentive effects of external recruiting. Our results show that if workers are heterogeneous, opening up a firm's career system may lead to a homogenization of the pool of contestants and thus encourage the firm's high-ability workers to exert more effort. If this positive effect outweighs the discouragement of low-ability workers, the firm will benefit from external recruiting. If, however, the discouragement effect dominates the homogenization effect, the firm should disregard external recruiting. In addition, product market competition may mean that opening up the career system becomes less attractive for a firm since it increases the incentives of its competitors’ workers and hence strengthens the competitors.

Keywords: Contest; Externalities; Recruiting; Wage policy (search for similar items in EconPapers)
JEL-codes: C72 J2 J3 (search for similar items in EconPapers)
Date: 2014
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Related works:
Working Paper: Externalities in Recruiting (2013)
Working Paper: Externalities in Recruiting (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:107:y:2014:i:pa:p:123-135

DOI: 10.1016/j.jebo.2014.08.008

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