Referrals and Search Efficiency: Who Learns What and When?
41 Pages Posted: 14 Apr 2016 Last revised: 28 Jun 2017
Date Written: May 2017
Abstract
Referrals can impact screening and self-selection of applicants during the hiring process. We model and estimate how referral information affects the selection of employees through job offers, acceptances, and turnover. Using rich data from a call center company, we show that referrals help employers attract applicants with superior performance. Yet, performance differences between referred and non-referred workers diminish with tenure through selective turnover. Our estimates reveal that referrals allow employers to screen on hard-to-observe but performance-relevant attributes for employees of both high performance and high propensity to stay. Thus, referred applicants complete much of the sorting during the hiring process.
Keywords: referrals, employer learning, learning about match quality
JEL Classification: J24, J31, M51
Suggested Citation: Suggested Citation