Information Frictions and Skill Signaling in the Youth Labor Market

Sara B. Heller and Judd B. Kessler

No 29579, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: C93 I21 J2 J48 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-exp, nep-lma and nep-ure
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