The Value of Reference Letters: Experimental Evidence from South Africa

Abstract

We show that reference letters from former employers alleviate information frictions in a low-skill labor market, improving applicant screening and gender equity. A resume audit study finds that using a reference letter in the application increases callbacks by 60 percent. Women drive the effect. Letters are effective because they provide valuable information about workers’ skills that employers use to select applicants of higher ability. A second experiment, which encourages job seekers to obtain and use a reference letter, finds consistent results. In particular, reference letters raise job interviews and employment for women. (JEL D83, J16, J24, J64, O12)

Linkedin(to) Job Opportunities: Experimental Evidence from Job Readiness Training

“…LinkedIn use may provide demand-side information, which helps firms screen workseekers, and supply-side information, which helps workseekers target job search and perform well in interviews. This reinforces recent work showing that information frictions distort job search and hiring in South Africa (Abel et al, 2019;Carranza et al, 2019;Pugatch, 2019). Some but not all of our results are consistent with a role for on-platform referral networks.…”

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

“…3 We build on this work by showing that both firms and workseekers face limited information about workseekers' skills. Our work is most similar to papers that study information frictions by simultaneously revealing information to both firms and workseekers about skill assessment results (Abebe et al, 2020a;Bassi and Nansamba, 2020) or evaluations from workseekers' past employers (Abel et al, 2020;Pallais, 2014). These papers show that information revelation changes workseekers' outcomes and interpret this as evidence of firm-side information frictions.…”

“…In a similar spirit, several papers show that making low-cost changes to ALMPs so they provide more information to firms and/or workseekers improves their effectiveness(Abel et al, 2020;Belot et al, 2018;Wheeler et al, 2019).…”

“…Wage and self employment status are not prespecified outcomes.The effects on employment and earnings are substantial and easily exceed the cost of the program. The employment effect is almost three times larger than the mean standardized short-run effect size of active labor market programs reviewed byCard et al (2018), larger than the effect of an intervention that helped similar South African workseekers get reference letters from past employers(Abel et al, 2020), and similar to the effect of a program that subsidized firms to hire South African workseekers from similar backgrounds(Levinsohn et al, 2013). The average earnings gain in the first three months after treatment is 778 South African rand (USD 130 PPP) -5.6 times the average variable cost of certification alone and 2.3 times the average variable cost of assessment and certification (details in Appendix B).…”

Anonymity or Distance? Job Search and Labour Market Exclusion in a Growing African City

“…Our results suggest that spatial frictions affect the allocation of labour within cities, extending a recent literature that studies how similar frictions affect the structural transformation of the rural economy (Gollin and Rogerson, 2015;Bryan and Morten, 2015;Asher and Novosad, 2015). We also contribute to a growing literature that studies the economic importance of cognitive and non-cognitive skills (Bowles et al, 2001;Heckman et al, 2006;Groh et al, 2012;Hoffman et al, 2015;Abel et al, 2016;Bassi and Nansamba, 2017). We show that these skills are not always accurately perceived by firms, suggesting that informational frictions can dampen the incentives for the optimal allocation of human capital.…”