US Department of Labor, Employment and Training Administration. 2000. Testing and Assessment: An Employer’s Guide to Good Practices
Provides assessment principles and their applications for managers and human resources professionals to reach their organizations’ HR goals or making hiring decisions.
Autor, David H. and David Scarborough, “Does Job Testing Harm Minority Workers? Evidence from Retail Establishments,” Quarterly Journal of Economics, 123 (2008), 219–277.
Uses hiring and productivity data from a national retail firm whose 1,363 stores switched from informal to test-based worker screening over the course of one year. Results suggest that job testing raised the precision of screening without introducing additional negative information about minority applicants, most plausibly because both the job test and the informal screen that preceded it were unbiased.
Wozniak, Abigail. 2015 "Discrimination and the Effects of Drug Testing on Black Employment." Review of Economics and Statistics, vol. 97(3), pages 548-566, July
Uses variation in the timing and nature of drug testing regulation to identify the impacts of testing on black hiring. Black employment in the testing sector is suppressed in the absence of testing, a finding which is consistent with ex ante discrimination on the basis of drug use perceptions.
Stanton, Christopher and Catherine Thomas (forthcoming). “Landing The First Job: The Value of Intermediaries in Online Hiring” Review of Economic Studies. Volume 83, Issue 2, April 2016, Pages 810–854.
Shows that intermediaries signal to employers that inexperienced workers are high quality. Workers affiliated with an intermediary have substantially higher job-finding probabilities and wages at the beginning of their careers compared to similar workers without such an affiliation. The results indicate that intermediaries have arisen endogenously to permit a more efficient allocation of workers to jobs.
Hoffman, Mitchell, Lisa B. Kahn and Danielle Li. (2015) “Discretion in Hiring” NBER Working Paper 21709.
Studies the introduction of job testing across 15 firms employing low-skilled service sector workers. When faced with similar applicant pools, managers who appear to hire against test recommendations end up with worse average hires. This suggests that managers often overrule test recommendations because they are biased or mistaken, not only because they have superior private information.
Horton, John Joseph. (2017) "The Effects of Algorithmic Labor Market Recommendations: Evidence from a Field Experiment," Journal of Labor Economics 35, no. 2
Algorithmically recommending workers to employers for the purpose of recruiting can substantially increase hiring: in an experiment conducted in an online labor market, employers with technical job vacancies that received recruiting recommendations had a 20% higher fill rate compared to the control.
Salop, J., & Salop, S. (1976). “Self-selection and turnover in the labor market.” Quarterly Journal of Economics, 90(4), 619-627.
Theoretically explores the firm's use of self- selection to minimize turnover costs. By predictably increasing an employee's wage with his tenure at the firm., an employer can discourage high-turnover individuals from applying and encourage low-turnover workers to apply. This essentially allows the applicant to guarantee his longevity with the firm, since he himself pays the consequences, in terms of foregone higher earnings, if he quits prematurely.
Dye, Ronald A, and Rick Antle, (1984). “Self-Selection via Fringe Benefits,” Journal of Labor Economics, 2(3):388-411.
Extends the theory of self-selection to circumstances in which economic agents have some access to markets. Explains the existence of multidimensional compensation packages in the presence of limited (re)marketability. Employment contracts that include fringe benefits are prominent examples of such multidimensional packages.
Barfort, Sebastian, Nikolaj A. Harmon, Frederik Hjorth, and Asmus Leth Olsen. 2019. "Sustaining Honesty in Public Service: The Role of Selection." American Economic Journal: Economic Policy, 11 (4): 96-123.
Which types of workers self-select into work environments where financial performance incentives are weak? In countries like Denmark where corruption is low, people who are more honest are much more likely to self-select into public sector jobs. In Denmark, dishonest individuals care more about money and self-select out of public service into higher-paying private sector jobs. This pattern differs sharply from existing findings from more corrupt settings. In Denmark, it suggests that raising public sector wages could actually backfire—by attracting more dishonest candidates into public service.
Dohmen, T., & Falk, A. (2011). “Performance pay and multidimensional sorting: Productivity, preferences, and gender.”American Economic Review, 101(2), 556-590.
Studies the impact of incentives on worker self-selection in a controlled laboratory experiment. Finds that output is higher in the variable-payment schemes compared to the fixed-payment scheme. This difference is largely driven by productivity sorting. In addition, different incentive schemes systematically attract individuals with different attitudes, such as willingness to take risks and relative self assessment as well as gender, which underlines the importance of multidimensional sorting.
Tsui, David and Marshall Vance 2022 “Sorting Effects of Broad-Based Equity Compensation” Management Science, forthcoming.
The standard principal-agent model predicts that broad-based equity compensation should be ineffective in motivating workers due to free-rider problems. Broad-based equity compensation could, however, still benefit management if it affects worker selection: which workers join the firm and remain committed to it? Using detailed employee-level data, the authors argue that broad-based equity pay attracts workers with higher trust in management, with potentially positive consequences for profitability.
Bartling, B., Fehr, E., & Schmidt, K. M. (2012). Screening, competition, and job design: Economic origins of good jobs. American Economic Review, 102(2), 834-64.
High-performance work systems give workers more discretion, thereby increasing effort productivity but also shirking opportunities. But they only work if workers are carefully screened for work attitude, and labor markets are competitive. The authors show that two fundamentally distinct job designs can survive in equilibrium: "bad" jobs with low discretion, low wages, and little rent-sharing, and "good" jobs with high discretion, high wages, and substantial rent-sharing.
Abel, Martin, Rulof Burger and Patrizio Piraino. The Value of Reference Letters: Experimental Evidence from South Africa American Economic Journal: Applied Economics 2020, 12(3): 40–71
Using a resume audit study, the authors show that reference letters from former employers increase callbacks by 60 percent, and reduce the gender gap in callbacks. Letters are effective because they provide valuable information about workers' skills that employers use to select applicants of higher ability.
Bellemare, Charles, Marion Goussé, Guy Lacroix, and Steve Marchand 2020 Video Resumes and Job Search Outcomes: Evidence from a Field Experiment IZA discussion paper no. 13656
Using a field experiment, the authors show that video resumes raise workers’ call-back rates for both workers with and without a wheelchair that was visible in the resume.
Kreisman, D., Smith, J., & Arifin, B. 2020. "Labor Market Signaling and the Value of College: Evidence from Resumes and the Truth." Unpublished manuscript, Georgia State University, 2020.
By comparing workers’ resumes on an on-line job board to official school records, the authors find that one in three workers who attended but did not complete college strategically choos not mention attending college at all. The authors also find evidence of lying on resumes, and show which degrees are most likely to be falsely claimed. They also study the extent to which workers benefit from omitting and falsifying their own resumes.
Cullen, Zoë, Will Dobbie, and Mitchell Hoffman 2023 Increasing the Demand for Workers with a Criminal Record Quarterly Journal of Economics, Volume 138, Issue 1, February 2023, Pages 103–150.
Working with a staffing platform, the authors asked hiring managers to make a series of hypothetical hiring decisions that affected whether workers with a criminal record could accept their jobs in the future. They found that 39% of businesses were willing to work with individuals with a criminal record at baseline, which rises to over 50% when businesses are offered crime and safety insurance, a single performance review, or a limited background check covering just the past year. Wage subsidies can achieve similar increases but at a substantially higher cost. Based on the authors’ findings, the staffing platform relaxed the criminal background check requirement and offered crime and safety insurance to interested businesses.
Dinerstein, Michael, and Isaac M. Opper, 2023 Screening with Multitasking: Theory and Empirical Evidence from Teacher Tenure Reform Unpublished paper, University of Chicago
What happens when employers screen their employees but only observe a subset of output? The authors study a change to teacher tenure policy in New York City, which increased the role that a single measure – test score value added – played in tenure decisions. In response to the policy, teachers increased test score value-added and decreased output that did not enter the tenure decision. The increase in test score value-added was largest for the teachers with more ability to improve students’ untargeted outcomes, increasing their likelihood of getting tenure. As a result, increased incentives for observable performance (test scores) improved the selection process on harder-to-reward dimensions of teacher output.
Aman-Rana, Shan, Daniel W. Gingerich, and Sandip Sukhtankar 2023 Screen Now, Save Later? The Trade-Off between Administrative Ordeals and Fraud NBER working paper no. 31364
Screening agents more carefully before interacting with them can reduce moral hazard problems, but too much screening raises administrative costs, causes delays, and could exclude honest agents. The authors study these trade-offs in one of the largest economic relief programs in US history: the Paycheck Protection Program (PPP). Using temporal variation in the documentation standards required for loan applications, they find that screening significantly reduced the amount of loan irregularities that likely indicate fraud. Just as important, increases in screening deterred borrowers with a checkered history from applying for loans in the first place. Because these applications no longer had to be screened, the documentation standards reduced fraud without imposing an undue administrative burden on legitimate firms.
Horton, John J, (2014). “The Effects of Algorithmic Labor Market Recommendations: Evidence from a Field Experiment,” Journal of Labor Economics, 35(2):345-385.
Algorithmically recommending workers to employers for the purpose of recruiting can substantially increase hiring: in an experiment conducted in an online labor market, employers with technical job vacancies that received recruiting recommendations had a 20% higher fill rate compared to the control.
Bohnet, Iris, (2017). “Start-Ups Use Technology to Redesign the Hiring Process,” New York Times, October 3.
Algorithmic design transforms the hiring process, makes recruitment decision smart, fair and easy. However, algorithmic bias is still a concern.
Dana, Jason, (2017). “The Utter Uselessness of Job Interviews,” New York Times, April 8.
Free-formed, unstructured job interviews could add nothing of relevance to the admission process, or even worse than irrelevance.
Erel, Isil., Lea H. Stern, Chenhan Tan and Michael S. Weisbach, (2018). “Selecting Directors Using Machine Learning,” NBER working paper number 24435.
Constructs algorithms to make out-of-sample predictions of director performance, and tests of the quality of these predictions. It shows that directors predicted to do poorly indeed do poorly compared to a realistic pool of candidates.
McGregor Jena, (2018). "Why robots aren’t likely to make the call on hiring you anytime soon," The Washington Post, October 11.
Although artificial intellegence has its own advantage in hiring, it "taught" itself to prefer male over female candidates. Algorithmic bias is a major concern in using the new hiring tools.
Li, Danielle, Lindsey R. Raymond, and Peter Bergman. 2020 Hiring as Exploration NBER working paper no. 27736.
To find the best workers over time, firms must balance “exploitation” (selecting from groups with proven track records) with “exploration” (selecting from under-represented groups to learn about quality). Modern hiring algorithms, however, are designed solely for exploitation. To improve on existing algorithms, the authors build a resume screening algorithm that values exploration by evaluating candidates according to their statistical upside potential. Using data from professional services recruiting within a Fortune 500 firm, they show that this approach improves the quality of candidates selected for an interview, while also increasing demographic diversity.
Barach, Moshe A. and John J. Horton, forthcoming. "How Do Employers Use Compensation History? :Evidence From a Field Experiment," Journal of Labor Economics SSRN.
Reports the results of a field experiment in which treated employers could not observe the compensation history of job applicants, whereas control employers could. There is no evidence that treated employers relied more heavily on alternative signals of productivity. Instead, they responded by evaluating more applicants, and evaluating those applicants more intensively.
Scheiber, Noam, (2018). “If a Law Bars Asking Your Past Salary, Does It Help or Hurt?” New York Times, February 16.
Laws prohibiting employers from asking job candidates salary history could be ineffective or even backfire: widen the gender gap or prompt statistical discrimination.
Agan, Amanda., Bo Cowgill and Laura Gee. “Salary Disclosure and Hiring: Field Experimental Evidence from a Two-Sided Audit Study.” work in progress, Rutgers University (no link currently available)
Fitzpatrick, Maria Donovan, (2014). “How much Are Public School Teachers Willing to Pay for Their Retirement Benefits?” NBER working paper number 20582.
The introduction of the opportunity provided to Illinois public school employees to purchase additional pension benefits allows the estimation of employees' willingness-to-pay for benefits relative to the cost of providing them. The results show employees are willing to pay 20 cents on average for a dollar increase in the present value of expected retirement benefits.
Wikipedia. “Golden handcuffs.”
“Golden handcuffs” refer to financial allurements and benefits that have the objective to encourage highly compensated employees to remain within a company or organization instead of moving from company to company (opposite of a golden parachute). Golden handcuffs include employee stock options, which vest only after a minimum service period, and other bonuses and benefits that must be repaid if the employee leaves before the date agreed on.
Ambuehl Sandro., Axel Ockenfels, and Colin Stewart, (2018). “Attention and Selection Effects,” SSRN, Rotman School of Management, Working Paper No. 3154197.
Shows theoretically and experimentally that incentives disproportionately attract those with high learning costs. These participants’ decisions rest on worse information, rendering ex post regret more likely. Selection based on learning costs is substantially more pronounced than selection on risk preferences in many of the treatments.
Schneider, Florian H., Fanny Brun, and Roberto A. Weber. Sorting and Wage Premiums in Immoral Work. CESifo Working Paper No. 8456, July 2020
Using a combination of methods, the authors investigate whether people who are least concerned with acting morally select into jobs generally perceived as immoral, and whether most peoples’ aversion to immoral work requires employers to pay higher wages in immoral activities. They note that sorting by “immoral” types into jobs that can cause harm may be detrimental for society.
Flory, Jeffrey A., Andreas Leibbrandt, Christina Rott, and Olga 2021 Stoddard Increasing Workplace Diversity: Evidence from a Recruiting Experiment at a Fortune 500 Company Journal of Human Resources, 56(1):73-92
In a natural field experiment, the authors vary the content in recruiting materials of a major financial services corporation. They find that signaling explicit interest in employee diversity more than doubles the interest in openings among racial minority candidates, as well as the likelihood that they apply and are selected. Impacts on gender diversity are less sharp and generally not significant.
Coffman, Katherine, Manuela Collis, and Leena Kulkarni. "Whether to Apply?" Management Science, Vol. 70, No. 7: 4649-4669.
The authors use lab and field experiments to study women’s willingness to apply for higher return, more challenging work. In male-typed domains, women view themselves as less qualified for a given opportunity, both because of differences in beliefs about own ability and in beliefs about where the bar is. Reducing ambiguity surrounding required qualifications reduces the gender gap in willingness to apply among qualified applicants, increasing both the diversity and talent of the applicant pool.