Reducing congestion in labor markets: A case study in simple market design
John J. Horton, Shoshana Vasserman, Mitchell Watt
Status: R&R at American Economic Journal: Microeconomics
Last updated: 2024
Summary
As job-seekers internalize neither the full benefits or costs of their application decisions, job openings do not necessarily obtain the socially efficient number of applications. Using a field experiment conducted in an online labor market, we find that some job openings receive far too many applications, but that a simple intervention can improve the situation. A treated group of job openings faced a soft cap on applicant counts. However, employers could easily opt out by literally clicking a single button. This tiny imposed cost on the demand side had large effects on the supply side, reducing the number of applicants to treated jobs by 11%—with even larger reductions in jobs where additional applicants were likely to be inframarginal. This reduction in applicant counts had no discernible effect on the probability a hire was made, or in the quality of the subsequent match. This kind of intervention is easy to implement by any online marketplace or job board and has attractive properties, saving job-seekers effort while still allowing employers with high marginal returns to more applicants to get them.
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@unpublished{horton2024reducingcongestioninlabormarketsacasestudyinsimplemarketdesign,
title = {{Reducing congestion in labor markets: A case study in simple market design}},
author = {Horton, John J. and Vasserman, Shoshana and Watt, Mitchell},
year = {2024},
url = {https://john-joseph-horton.com/papers/reducing-congestion-in-labor-markets-a-case-study-in-simple-market-design/}
}