No. 958: Matching Frictions and Distorted Beliefs:Evidence from a Job Fair Experiment
Girum Abebe ,
World Bank,
Stefano Caria ,
University of Warwick
Marcel Fafchamps ,
Freeman Spogli Institute, Stanford University
Paolo Falco ,
University of Copenhagen
Simon Franklin ,
Queen Mary University of London
Simon Quinn ,
University of Oxford
Forhad Shilpi ,
World Bank
June 30, 2023
Abstract
We evaluate the impacts of a randomized job-fair intervention in which jobseekers and employers can meet at low cost. The intervention generates few hires, but it lowers participants’ expectations and causes both firms and workers to invest more in search as predicted by a theoretical model; this improves employment outcomes for less educated jobseekers. Through a unique two-sided belief-elicitation survey, we confirm that firms and jobseekers have over-optimistic expectations about the market. This suggests that, beyond slowing down matching, search frictions have a second understudied cost: they entrench inaccurate beliefs, further distorting search strategies and labour-market outcomes.
J.E.L classification codes: O18, J22, J24 , J61, J64
Keywords:job-search strategy; recruitment; matching; expectations; beliefs; reser-vation wage; youth unemployment; Ethiopia