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  5. Matching in Markets with Information Frictions: Applications in Labor Markets and School Choice
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Matching in Markets with Information Frictions: Applications in Labor Markets and School Choice

Paper Session

Sunday, Jan. 3, 2021 12:15 PM - 2:15 PM (EST)

Hosted By: Labor and Employment Relations Association
  • Chair: Amanda Pallais, Harvard University

Preference Signaling and Worker-Firm Matching: Evidence from Interview Auctions

Russell Weinstein
,
University of Illinois-Urbana-Champaign
Ron Laschever
,
Compass Lexecon

Abstract

We study whether there are improvements in worker-firm matching when employers and applicants can credibly signal their interest in a match. Using a detailed résumé dataset of more than 500 applicants from one university over five years, we analyze a matching process in which firms fill some of their interview slots by invitation and the remainder are filled by an auction. We find that lower-wage firms are more likely to make offers to, and hire, high-quality applicants obtaining their interview through the auction, relative to the interviewees they invited. This is not true for higher-wage firms. We find further evidence suggesting the auction leads to improvements in matching, including yielding applicants who are more likely to accept offers, conditional on receiving one. In addition, the results suggest that interns at lower-wage firms who obtained their interview through the auction are more likely to convert to full-time hires, relative to interns obtaining their interview through the firm's invitation. Our findings suggest lower-wage firms may benefit from a mechanism that identifies interested applicants. We also describe which types of applicants benefit from this signaling mechanism. Finally, we examine the value-added of the mechanism relative to a counterfactual where the candidates cannot signal their interest.

Evaluating School Choice Mechanism Changes

Seth Zimmerman
,
Yale University
Adam Kapor
,
Princeton University
Christopher Neilson
,
Princeton University

Abstract

This paper uses a policy change in New Haven, Connecticut to study how application behavior and student welfare in centralized school choice depend on the mechanism districts use to assign students to schools. In 2019, New Haven switched from an `Immediate Acceptance' (IA) algorithm to a `Deferred Acceptance' (DA) algorithm. The goal of this change was to simplify choice for households: while the IA mechanism rewards informed strategic play, the DA mechanism aims to make truthful preference reporting a dominant strategy. We use administrative and survey data from before and after the mechanism change to conduct three empirical exercises. We first describe how households updated their beliefs and changed their behavior following the change in assignment mechanism. We show that rates of strategic play decline after the mechanism change, but not to zero. Changes in play occur in spite of limited understanding of changes in mechanism rules. This suggests that the adoption of non-strategic or “unsophisticated” approaches to choice, rather than analysis of the rules of the new mechanism, may drive behavioral changes. Next, we explore how imperfect compliance with the switch to DA and unsophisticated play jointly impact the welfare comparison between IA and DA. We develop an empirical model of school choice that incorporates both features, and also allows for strategic play with potentially inaccurate beliefs about admissions chances. We estimate the model using data from before and after the mechanism change, and use it to evaluate the behavioral and welfare effects of the change. In the third section of the paper, we test the performance of empirical models of school choice by comparing the changes in application and placement outcomes predicted by our model and pre-specified models in Kapor, Neilson, and Zimmerman (forthcoming) against those observed in the data following the mechanism change.

Discrimination in Hiring

Alan Benson
,
University of Minnesota
Simon Board
,
University of California-Los Angeles
Moritz Meyer-ter-vehn
,
University of California-Los Angeles

Abstract

Using data on 36,949 newly-hired commission-based salespeople at a major U.S. retailer, we find that white, black and Hispanic managers within the same store are more likely to hire workers of their own race. This may be caused by managers' intrinsic taste for hiring same-race applicants (taste-based discrimination), or by their greater ability to screen same-race applicants (screening discrimination). We derive the testable implications of these models for the mean and variance of productivity and show that white and Hispanic hiring is consistent with the screening hypothesis. We find little evidence of complementarities between supervising (rather than hiring) managers or employee discrimination in this setting.
Discussant(s)
Lisa B. Kahn
,
University of Rochester
Alex Rees-Jones
,
Cornell University
Aislinn Bohren
,
University of Pennsylvania
JEL Classifications
  • M5 - Personnel Economics
  • M1 - Business Administration