Overcoming Information Asymmetry in Job Search : The Power of a Reference Letter

This study finds that reference letters improve firms’ screening ability and employment outcomes, especially for women

Abstract

The labor market is characterized by information gaps between work seekers and prospective employers, particularly when it comes to hiring low-skill entry level workers. Information asymmetries about workers’ skills can result in poorer matches, lower productivity for employers, and increased inequity for the unemployed. One approach to resolving the asymmetry is introducing a formal referral system: reference letters from former employers. The authors finds that reference letters improve firms’ screening ability and employment outcomes, especially for women. Despite their high value, the use of reference letters in job applications is low, partly due to work seekers underestimating their value.

This work is part of the Closing the Gender Gap in Africa: evaluating new policies and programmes for women’s economic empowerment programme

Citation

Carranza, Eliana; Pimkina, Svetlana. 2018. Overcoming Information Asymmetry in Job Search : The Power of a Reference Letter. Gender Innovation Lab Policy Brief; No. 24. World Bank, Washington, DC.

Overcoming Information Asymmetry in Job Search : The Power of a Reference Letter

Updates to this page

Published 1 April 2018