Referrals and Search Efficiency: Who Learns What and When?

Tavis Barr, Raicho Bojilov () and Lalith Munasinghe ()

Journal of Labor Economics, 2019, vol. 37, issue 4, 1267 - 1300

Abstract: Referrals can improve screening and self-selection of applicants during the hiring process. We model and estimate how referral information affects the selection of employees through job offers, acceptances, and turnover. Using data from a call center company, we show that referrals help employers attract applicants of superior performance. Yet performance differences between referred and nonreferred workers diminish with tenure through selective turnover. Our estimates reveal that referrals allow employers to screen on hard-to-observe but performance-relevant attributes for employees of high performance and high propensity to stay. Thus, referred applicants complete much of the sorting during the hiring process.

Date: 2019
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