Many workers in the developing world are employed in small, relatively unproductive firms, limiting employment growth and constraining workers’ ability to rise out of poverty. Recent empirical work highlights labor market frictions as a barrier to firm growth: when faced with frictions that make it difficult to determine a job-seeker’s ability or skills, firms may adopt inefficient hiring strategies, such as leaving positions vacant, or retaining unproductive workers. These outcomes are not only costly for firms but also for workers who will face higher rates of unemployment.
The goal of our work is to understand the constraints that firms in the developing world face when hiring workers, particularly those with relatively little experience in the labor market.
Specifically, this project aims to determine how online job portals help SME’s in India identify the most suitable workers, thereby stimulating firm growth and reducing unemployment. To this end, we have designed a randomized control trial that will test the impact of two specific interventions: a promotional campaign to advertise individual job posts, and screening via skills assessments administered to job applicants. The trial involves providing these assessments to three companies throughout India, with randomly selected job postings assigned to the treatment group. Those in this group are asked to take a skill assessment that will be shared with recruiters and hiring managers. To carry out the evaluation, researchers are partnering with Aspiring Minds, a firm providing a range of skill assessments for different job roles, which can be used to rapidly screen candidates. We are also working closely with Babajob, India’s largest job portal for the informal sector, to adapt existing assessment content and integrate it to the Babajob platform, making assessments available to firms and jobseekers in the informal or entry-level sector. The findings from this research will contribute to the limited empirical research investigating how labor market frictions affect firm productivity in developing countries, shedding light on cost-effective interventions to overcome these frictions. Results forthcoming.
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