Statistical Externalities and the Labour Market in the Digital Age

30 Pages Posted: 29 Jul 2015

See all articles by Paul Seabright

Paul Seabright

University of Toulouse I - Industrial Economic Institute (IDEI); Centre for Economic Policy Research (CEPR)

Ananya Sen

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Date Written: July 24, 2015

Abstract

We examine whether a reduction in the cost of applying for jobs that leads to an increase in the number of candidates applying for jobs at a firm, may make the firm worse off. We build a model where there is worker heterogeneity and firms can choose to screen workers at a cost. In equilibrium, a reduction in application costs can lower a firm's payoff by raising the number of applications from workers who, on average, are of lower quality than those who apply when application costs are high. An additional candidate can impose a negative externality on the firm by adversely affecting the statistical quality of its candidate pool. We discuss applications to the phenomenon of attention congestion through advances in digital technology.

Keywords: job search, internet, matching models, attention congestion

JEL Classification: J60, J64, M51

Suggested Citation

Seabright, Paul and Sen, Ananya, Statistical Externalities and the Labour Market in the Digital Age (July 24, 2015). Available at SSRN: https://ssrn.com/abstract=2636514 or http://dx.doi.org/10.2139/ssrn.2636514

Paul Seabright

University of Toulouse I - Industrial Economic Institute (IDEI) ( email )

Manufacture des Tabacs
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Toulouse Cedex, F-31000
France
+33 5 61 12 86 17 (Phone)
+33 5 61 12 86 37 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ananya Sen (Contact Author)

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

4800 Forbes Avenue
Pittsburgh, PA Pittsburgh 15213-3890
United States

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