Information Frictions and Skill Signaling in the Youth Labor Market

Heller, Sara B.; Kessler, Judd B.

doi:10.1257/pol.20220544

Abstract

This paper provides evidence that information frictions limit the labor market trajectories of youth in the U.S. We provide credible skill signals—recommendation letters based on supervisor feedback—to a random subset of 43,409 participants in New York City’s summer jobs program. Letters increase employment the following year by 3 percentage points (4.5 percent). Earnings effects grow over 4 years to a cumulative $1,349 (4.9 percent). We find little evidence of increased job search or confidence; instead, signals may help employers better identify successful matches with high-productivity workers. Pulling youth into the labor market can, however, hamper on-time high school graduation, especially among low-achieving students.

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Information Frictions and Skill Signaling in the Youth Labor Market

Abstract

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