Abstract:
Private firms in developing countries face many hiring frictions. Increasingly, firms use employment agencies to find professional workers. How do employment agencies improve firm's hiring? We focus on a new type of employment agencies in Ethiopia who match skilled labor to professional jobs. We sample 799 private firms with a job vacancy, and randomly match an employment agency to 45% of the vacancies to provide an extra applicant. Agencies are more likely to recommend skilled labor with worse employment status. Treated firms are 13.8% more likely to hire any worker to the posted vacancy, but not those recommended from the agency. We further find that treated firms are less likely to perceive skilled labor with high outside option, suggesting firms may not know how difficult skilled labor may find a good job in the labor market. We are developing a model to understand the broader implications of this hiring friction.
