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The Selection of Talent: Experimental and Structural Evidence from Ethiopia

Girum Abebe, A. Stefano Caria, Esteban Ortiz-Ospina

American Economic Review · 2021 · Volume 111 · Issue 6

DOI: 10.1257/aer.20190586

Abstract

We study how search frictions in the labor market affect firms' ability to recruit talented workers. In a field experiment in Ethiopia, we show that an employer can attract more talented applicants by offering a small monetary incentive for making a job application. Estimates from a structural model suggest that the intervention is effective because the cost of making a job application is large, and positively correlated with jobseeker ability. We provide evidence that this positive correlation is driven by dynamic selection. In a second experiment, we show that local recruiters underestimate the positive impacts of application incentives.

Keywords

Labor Demand, Human Capital, Skills, Occupational Choice, Labor Productivity, Wage Level and Structure, Wage Differentials, Unemployment: Models, Duration, Incidence, and Job Search, Economic Development: Human Resources, Human Development, Income Distribution, Migration

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