“Job Search and Hiring With Two-Sided Limited Information About Workseekers’ Skills

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Microentrepreneurship in Developing Countries

“…One potential reason is information frictions combined with firing costs, whereby firms are unsure of a worker's ability and if they realize after hiring that a worker is low productivity, they might have legal difficulty firing him. Carranza et al (2019) find that providing workers a way to certify their skills to firms can increase employment rates among youth in South Africa, with part of the mechanism being more information for the firms on the applicants' skills. They find in their setting that risk aversion about hiring a worker with unknown skills is an especially salient concern for microentrepreneurs, who are also least able to afford the fixed cost of setting up a system to assess workers' skills during the application process.…”