The Signal of Applying for a Job Under a Vacancy Referral Scheme

Abstract

We investigate the signalling effect related to participation in active labor-market programs. To this end, we conduct an experiment in which human resources professionals make hiring decisions concerning fictitious job candidates who apply either under a job-vacancy referral system or directly. We provide first causal evidence for a substantial adverse effect of referral on the probability of being hired. In addition, we find that employers perceive referred candidates as being less motivated than other candidates.