The value of reference letters
Stellenbosch Working Paper Series No. WP06/2017Publication date: June 2017
Author(s):
[protected email address] (Department of Economics, Stellenbosch University)
[protected email address] (School of Economics, University of Cape Town)
We show that reference letters from former employers alleviate information asymmetries about workers’ skills and improve both match quality and equity in the labor market. A resume audit study finds that using a reference letter in the application increases callbacks by 61%. Women disproportionately benefit. Letters are effective because they provide valuable information about workers’ skills that employers use to select applicants of higher ability. A second experiment, which encourages job seekers to obtain and use a reference letter, finds consistent results. In particular, employment rates for women who obtain letters double, fully closing the gender gap in our sample.
JEL Classification:D83, J24, M51
Keywords:Unemployment, references, South Africa, active labor market policies
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Topic: "Two competing approaches in South African competition policy: merger control and anti-cartel enforcement over the past 30 years"
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