EMPLOYMENT RISK AND JOB-SEEKER PERFORMANCE

Abstract

Using detailed labor recruitment data in combination with randomized variation in individuals’ outside job opportunities, we show that providing job certainty during recruitment leads to substantial job-seeker performance gains. Job-seeker performance is highest and effort is lowest among those assigned to receive a guaranteed outside job offer (where employment risk is eliminated), while performance is lowest and effort highest among those receiving no chance of an outside job offer. Performance among those assigned uncertain outside job offers consistently lies between the two extremes. We conjecture that the pattern of results is most consistent with stress-induced performance reductions attributable to job uncertainty. We rule out several other competing theories.