Discussion Paper Details

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Title: Interviews and Adverse Selection

Author(s): Jens Josephson and Joel Shapiro

Publication Date: May 2008

Keyword(s): Asymmetric Information, Decentralized Labour Markets, Interview costs, Matching and Professional Labour Markets

Programme Area(s): Labour Economics

Abstract: Interviewing in professional labour 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.

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Bibliographic Reference

Josephson, J and Shapiro, J. 2008. 'Interviews and Adverse Selection'. London, Centre for Economic Policy Research.