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Interviews and adverse selection
Josephson, Jens; Shapiro, Joel
Universitat Pompeu Fabra. Departament d'Economia i Empresa
Interviewing in professional labor markets is a costly process for firms. Moreover, poor screening can have a persistent negative impact on firms bottom lines and candidates careers. In a simple dynamic model where firms can pay a cost to interview applicants who have private information about their own ability, potentially large inefficiencies arise from information-based unemployment, where able workers are rejected by firms because of their lack of offers in previous interviews. This effect may make the market less efficient than random matching. We show that the first best can be achieved using either a mechanism with transfers or one without transfers.
Labour, Public, Development and Health Economics
decentralized labor markets
professional labor markets
asymmetric information
interview costs
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