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Who Gets the Job: A Model of Delegated Recruitment with Multidimensional Applicants

Abstract

In this paper, I construct a theoretical model of delegated recruitment. In the model, applicants are multidimensional, differing in both expected ability and what I term hiring risk. When the space of contracts is limited to the bonus contract commonly observed in the recruitment industry, the pool of applicants exhibits lower hiring risk then the first-best benchmark, even when recruiters are risk neutral. This implies recruiters pass-over high risk high reward applicants in favor of low risk, low-reward applicants. In a parametric implementation of the model, search efficiency and search intensity increase as the negative correlation between expected ability and hiring risk increases. Although the model is applied to recruiters, it extends well to any situations where search is delegated, the searched item has two dimensions, and there is an initial trial period.

Jacob Kohlhepp
Jacob Kohlhepp
PhD Student in Economics

My research interests include individual labor economics and applied theory.