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Information Frictions and Skill Signaling in the Youth Labor Market

By: Contributor(s): Material type: Continuing resourceContinuing resourcePublication details: American Economic Journal: Economic Policy; 2024Description: 01-33ISSN:
  • 1945-7731
Subject(s): Online resources: Summary: 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
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Article Index Article Index Dr VKRV Rao Library Vol. 16, No. 4 Not for loan AI1003

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 ,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.

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