Do employers learn more from referrals than from other recruitment channels?

Nicole Gürtzgen and Laura Pohlan

Labour Economics, 2024, vol. 89, issue C

Abstract: We study whether referrals deliver better information about the productivity of new hires than other recruiting channels. Using combined vacancy-register data, we document that referrals are associated with less screening and lower search costs. We demonstrate that the referral wage premium is informative on referrals’ information advantage only if differences in screening are accounted for. Consistent with the predictions from a learning model, referrals increase new hires’ job stability and wages, with the effects diminishing over time. Results suggest that the referral information advantage is particularly pronounced for males and when employers use referrals as the only search channel.

Keywords: Matching; Referral based hiring; Information frictions; Recruiting channels (search for similar items in EconPapers)
JEL-codes: C26 H40 J64 L96 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:89:y:2024:i:c:s0927537124000691

DOI: 10.1016/j.labeco.2024.102574

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