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  3. 2021
  4. Preliminary Program
  5. Labor Markets in Developing Countries: Micro and Macro Perspectives
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Labor Markets in Developing Countries: Micro and Macro Perspectives

Paper Session

Tuesday, Jan. 5, 2021 3:45 PM - 5:45 PM (EST)

Hosted By: American Economic Association
  • Chair: Douglas Gollin, University of Oxford

Matching Frictions and Distorted Beliefs: Evidence from a Job Fairs Experiment

Stefano Caria
,
University of Warwick
Girum Abebe
,
Ethiopian Development Research Institute
Marcel Fafchamps
,
Stanford University
Simon Franklin
,
Queen Mary University of London
Simon Quinn
,
University of Oxford

Abstract

We evaluate the impacts of a job fair intervention that decreases meeting costs between large firms and young jobseekers, randomizing fair attendance among workers and among firms. The fairs generate a rich set of interactions between workers and firms, but very few hires: one for every twelve firms that attended. On the other hand, the fairs motivate both firms and workers to invest more in job search, which leads to better employment outcomes for some jobseekers. Using data from a unique two-sided survey with a new sample of young workers and firms alongside data from the fairs, we show that these impacts are driven by the fact that both firms and workers have inaccurate beliefs about fundamental aspects of the labor market – in particular, the distribution of skills and the competitiveness of specific occupations – which are corrected at the job fairs. Overall, our evidence suggests that, beyond directly slowing down efficient matching in the labour market, search frictions can impose a second, understudied cost: they entrench inaccurate beliefs, further distorting search strategies and the allocation of talent.

Job Search and Matching with Two-Sided Limited Information about Workseekers’ Skills

Eliana Carranza
,
World Bank
Robert Garlick
,
Duke University
Kate Orkin
,
University of Oxford
Neil Rankin
,
University of Stellenbosch

Abstract

Workseekers’ search decisions and firms’ hiring decisions use potentially limited information about workseekers’ skills. We conduct three field experiments which find patterns consistent with both firms and workseekers facing limited information about workseekers’ skills. Assessing workseekers’ skills, giving workseekers the assessment results, and helping them to credibly share the results with firms increases workseekers’ employment and earnings. It also aligns their beliefs and search strategies more closely with their skills. Giving this information only to workseekers has similar effects on beliefs and search, but smaller effects on employment and earnings. Giving information only to firms increases callbacks. These patterns are consistent with two-sided information frictions, a finding that is important for the design of information-provision mechanisms.

A Cross-Country Perspective on the Labor Market Responses to Aggregate Shocks

Kevin Donovan
,
Yale University
Todd Schoellman
,
Federal Reserve Bank of Minneapolis

Abstract

We assess the cyclicality of labor market stocks (employment, unemployment) and flows (job-finding rate, employment exit rate) in a cross-country context. Our work builds on the database we developed in Donovan et al. (2020), which contains short panel microdata for 65 million workers spanning 42 countries around the world and across a wide range of development. The scope of the data allow us to document how labor market institutions, development, and the type of shock matter for cyclicality. We use the microdata to assess what portion of the overall findings can be attributed to observable characteristics of workers and their employers.

Labor Market Frictions and Economic Development: Cross-Country Evidence from Employment Durations

Charles Gottlieb
,
University of St. Gallen
Jan Grobovsek
,
University of Edinburgh
Markus Poschke
,
McGill University

Abstract

We harmonize repeated cross-sections on individual labor market outcomes for many countries, ranging in income per capita from Niger to Luxembourg and document that mean employment durations increase with GDP per worker across countries. Differences in wage worker characteristics across countries explain only one quarter of the cross-country variation in employment durations. Two thirds of the variation are due to differences across countries in the return to worker characteristics. Most of the variation in return differences is driven by education, with a higher (tenure) return to education in richer countries. To understand the sources of this gap, we estimate hazard functions by population subgroups for all countries, and use them to estimate a model of labor market turnover. This gives insights into the extent to which observed differences in employment duration are driven by differences in information frictions, matching frictions and institutional factors.
Discussant(s)
Melanie Morten
,
Stanford University
Clément Imbert
,
University of Warwick
Federico Rossi
,
University of Warwick
Yongseok Shin
,
Washington University in St. Louis
JEL Classifications
  • O1 - Economic Development
  • O4 - Economic Growth and Aggregate Productivity