Why is Unemployment Duration a Sorting Criterion in Hiring?

43 Pages Posted: 10 Jul 2017

See all articles by Eva Van Belle

Eva Van Belle

Ghent University - Department of Social Economics

Ralf Caers

KU Leuven

Marijke De Couck

Vrije Universiteit Brussel (VUB)

Valentina Di Stasio

University of Oxford

Stijn Baert

Ghent University; University of Antwerp; Catholic University of Louvain (UCL); Institute for the Study of Labor (IZA)

Abstract

Recent evidence from large-scale field experiments has shown that employers use job candidates' unemployment duration as a sorting criterion. In the present study, we investigate the mechanisms underlying this pattern. To this end, we conduct a lab experiment in which participants make hiring decisions concerning fictitious job candidates with diverging unemployment durations. In addition, these participants rate the job candidates on statements central to four theoretical mechanisms often related to the scarring effect of unemployment: general signalling theory, (perceived) skill loss, queuing theory, and rational herding. We use the resulting data to estimate a multiple mediation model, in which the effect of the duration of unemployment on hiring intentions is mediated by the four theories. The lower hiring chances of the long-term unemployed turn out to be dominantly driven by the perception of longer unemployment spells as a signal of lower motivation. Recent evidence from large-scale field experiments has shown that employers use job candidates' unemployment duration as a sorting criterion. In the present study, we investigate the mechanisms underlying this pattern. To this end, we conduct a lab experiment in which participants make hiring decisions concerning fictitious job candidates with diverging unemployment durations. In addition, these participants rate the job candidates on statements central to four theoretical mechanisms often related to the scarring effect of unemployment: general signalling theory, (perceived) skill loss, queuing theory, and rational herding. We use the resulting data to estimate a multiple mediation model, in which the effect of the duration of unemployment on hiring intentions is mediated by the four theories. The lower hiring chances of the long-term unemployed turn out to be dominantly driven by the perception of longer unemployment spells as a signal of lower motivation.

Keywords: unemployment scarring, signalling theory, queuing theory, rational herding

JEL Classification: J64, J24, J23, C91

Suggested Citation

Van Belle, Eva and Caers, Ralf and De Couck, Marijke and Di Stasio, Valentina and Baert, Stijn, Why is Unemployment Duration a Sorting Criterion in Hiring?. IZA Discussion Paper No. 10876. Available at SSRN: https://ssrn.com/abstract=2998986

Eva Van Belle (Contact Author)

Ghent University - Department of Social Economics ( email )

Hoveniersberg 24
Gent, 9000
Belgium

Ralf Caers

KU Leuven ( email )

Oude Markt 13
Leuven, 3000
Belgium

Marijke De Couck

Vrije Universiteit Brussel (VUB) ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium

Valentina Di Stasio

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Stijn Baert

Ghent University ( email )

University of Antwerp ( email )

Prinsstraat 13
Antwerp, Antwerp 2000
Belgium

HOME PAGE: http://https://www.uantwerpen.be/nl/personeel/stijn-baert/

Catholic University of Louvain (UCL) ( email )

Place Montesquieu, 3
Louvain-la-Neuve, 1348
Belgium

HOME PAGE: http://https://www.uclouvain.be/en-309318.html

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=6832

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