American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Information Frictions and Skill Signaling in the Youth Labor Market
American Economic Journal: Economic Policy
vol. 16,
no. 4, November 2024
(pp. 1–33)
Abstract
This paper provides evidence that information frictions limit the labor market trajectories of US youth. We provide credible skill signals—recommendation letters based on supervisor feedback—to a random subset of 43,409 participants in New York's summer jobs program. Letters increase employment the following year by 3 percentage points (4.5 percent). Earnings effects grow over four years to a cumulative $1,349 (4.9 percent). We find little evidence of increased job search or confidence; instead, signals may help employers better identify successful matches with high-productivity workers. Pulling youth into the labor market can, however, hamper on-time graduation, especially among low-achieving students.Citation
Heller, Sara B., and Judd B. Kessler. 2024. "Information Frictions and Skill Signaling in the Youth Labor Market." American Economic Journal: Economic Policy, 16 (4): 1–33. DOI: 10.1257/pol.20220544Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- J13 Fertility; Family Planning; Child Care; Children; Youth
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- J64 Unemployment: Models, Duration, Incidence, and Job Search
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