Hiring Decisions under Productivity Uncertainty: Risk Preferences and Inaccurate Statistical Discrimination in NHL Entry Drafts

Chengyuan Hua and Brad Humphreys
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Chengyuan Hua: West Virginia University

No 25-01, Working Papers from Department of Economics, West Virginia University

Abstract: This paper analyzes firm hiring decisions under uncertainty about worker productivity utilizing quasi-experimental variation generated by age requirements with specified cutoff dates. We exploit an exogenous September 15 cutoff date in the National Hockey League entry draft to estimate a sharp RDD and find evidence of risk aversion by teams when drafting players. Specifically, teams appear risk averse in early rounds, but risk neutral in later rounds, supporting predictions made by models in the literature. Additional evidence from a triple differences model shows relative-age-based statistical discrimination in the draft, providing implications for firm hiring strategies. We also find suggestive evidence that this discrimination is partly driven by experience, and more accurate statistical discrimination is associated with greater team success.

Keywords: Hiring Decisions; Risk Preferences; Statistical Discrimination; National Hockey League; Entry Drafts; Relative Age (search for similar items in EconPapers)
JEL-codes: J23 J24 J71 M51 Z22 (search for similar items in EconPapers)
Pages: 42 pages
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