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Why Is Unemployment Duration a Sorting Criterion in Hiring?

Eva Van Belle (), Ralf Caers (), Marijke De Couck, Valentina Di Stasio () and Stijn Baert ()
Additional contact information
Eva Van Belle: University of Neuchatel
Ralf Caers: KU Leuven
Marijke De Couck: Free University of Brussels
Valentina Di Stasio: Utrecht University

No 10876, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Recent evidence from large-scale field experiments has shown that employers use job candidates' unemployment duration as a sorting criterion. In the present study, we investigate the mechanisms underlying this pattern. To this end, we conduct a lab experiment in which participants make hiring decisions concerning fictitious job candidates with diverging unemployment durations. In addition, these participants rate the job candidates on statements central to four theoretical mechanisms often related to the scarring effect of unemployment: general signalling theory, (perceived) skill loss, queuing theory, and rational herding. We use the resulting data to estimate a multiple mediation model, in which the effect of the duration of unemployment on hiring intentions is mediated by the four theories. The lower hiring chances of the long-term unemployed turn out to be dominantly driven by the perception of longer unemployment spells as a signal of lower motivation. Recent evidence from large-scale field experiments has shown that employers use job candidates' unemployment duration as a sorting criterion. In the present study, we investigate the mechanisms underlying this pattern. To this end, we conduct a lab experiment in which participants make hiring decisions concerning fictitious job candidates with diverging unemployment durations. In addition, these participants rate the job candidates on statements central to four theoretical mechanisms often related to the scarring effect of unemployment: general signalling theory, (perceived) skill loss, queuing theory, and rational herding. We use the resulting data to estimate a multiple mediation model, in which the effect of the duration of unemployment on hiring intentions is mediated by the four theories. The lower hiring chances of the long-term unemployed turn out to be dominantly driven by the perception of longer unemployment spells as a signal of lower motivation.

Keywords: queuing theory; signalling theory; unemployment scarring; rational herding (search for similar items in EconPapers)
JEL-codes: J64 J24 J23 C91 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-lma
Date: 2017-07
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