How Does Collective Reputation Affect Hiring? Selection and Sorting in an Online Labour Market

Posted: 26 May 2015

See all articles by Guo Xu

Guo Xu

London School of Economics & Political Science (LSE) - Department of Economics; University of California, Berkeley

Date Written: May 17, 2015

Abstract

How does collective reputation affect hiring and selection into jobs? Using detailed hiring data from a global online labour market, where the country of residence is the salient group characteristic, we document a mechanism through which collective reputation can perpetuate initial group inequality. Using an instrumental variable strategy, we first identify reputational externalities between an employer's very first hire and the propensity to contract more workers from the same country. Employers, contingent on their first worker's performance (as measured by a public rating), go on to almost exclusively hire from the same country. This coincides with a strong and positive supply-side sorting response: Observing their predecessor's success, workers from the same country are more likely to apply and tend to be of higher quality. Employers, facing better applicants, are in turn more likely to continue providing top ratings for later hires from the first hire country. Collective reputation hence appears to serve as a coordination device that enables workers to positively sort with employers: Good workers then attract more good workers from the same country and vice versa.

Keywords: Collective Reputation, Online Markets, Hiring, Discrimination

JEL Classification: J7, J16, L14

Suggested Citation

Xu, Guo and Xu, Guo, How Does Collective Reputation Affect Hiring? Selection and Sorting in an Online Labour Market (May 17, 2015). Available at SSRN: https://ssrn.com/abstract=2609898 or http://dx.doi.org/10.2139/ssrn.2609898

Guo Xu (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

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