We show that helping young job-seekers signal their skills to employers generates large and persistent improvements in their labour market outcomes. We do this by comparing an intervention that improves the ability to signal skills (the ‘job application workshop’) to a transport subsidy treatment designed to reduce the cost of job search. In the short-run, both interventions have large positive effects on the probability of finding a formal job. The workshop also increases the probability of having a stable job with an open-ended contract. Four years later, the workshop significantly increases earnings, job satisfaction, and employment duration, but the effects of the transport subsidy have dissipated. Gains are concentrated on individuals who generally have worse labour market outcomes. Overall, our findings highlight that young people possess valuable skills that are unobservable to employers. Making these skills observable generates earnings gains that are far greater than the cost of the intervention.

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We study how search frictions in the labor market affect firms’ ability to recruit talented workers. In a field experiment in Ethiopia, we show that an employer can attract more talented applicants by offering a small monetary incentive for making a job application. Estimates from a structural model suggest that the intervention is effective because the cost of making a job application is large, and positively correlated with jobseeker ability. We provide evidence that this positive correlation is driven by dynamic selection. In a second experiment, we show that local recruiters underestimate the positive impacts of application incentives. (JEL J23, J24, J31, J64, O15)

Journal articleIFPRI3; ISI; CRP2DSGD; PIMPRCGIAR Research Program on Policies, Institutions, and Markets (PIM