A new paper published in the American Economic Journal: Macroeconomics, by Pieter Gautier, together with former PhD student Xiaoming Cai, and Ronald Wolthoff, explores how firms screen applicants and how this shapes sorting in the labor market.
While most models assume firms and workers meet bilaterally, this paper allows vacancies to attract many applicants, with firms screening only a fraction. Positive sorting emerges when production complementarities outweigh a counterforce captured by quality–quantity elasticities.
Interestingly, the sorting threshold depends on the share of high-type workers and increases with the number of interviews firms can conduct. The model also shows how policies like Ban the Box, which restrict ex post screening, can backfire, prompting firms to screen more intensively before applications are submitted, potentially discouraging some workers from applying.
🔍 Curious? Read more here: https://www.aeaweb.org/articles?id=10.1257/mac.20240028