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2016 Documento de Trabajo #327

Do High-Wage Jobs Attract more Applicants? Directed Search Evidence from the Online Labor Market

Are workers applying more to high-wage jobs? To what extent do job seekers guide their search using information posted by employers? In the theoretical literature, workers directing search to jobs offering higher wages has strong implications for labor market efficiency, but the evidence supporting this behavior is scarce and murky. We provide strong evidence of directed search in online job markets. We use a novel feature of our data: even if employers choose not to make offered wages visible for applicants, we observe them as econometricians. Estimates using only explicitly posted wages suffer from selection bias because job ads that post an explicit wage require significantly lower education and experience, and offer lower wages. We find significant evidence for directed search evidence when wages are not explicitly declared, suggesting that the text and requirements of the posted job ad tacitly convey wage information. Moreover, job ad requirements are closely aligned with their applicants` traits, in line with predictions of directed search models with heterogeneity. Our evidence suggests that job ads with hidden wages are noisy signals of a high expected wage, used to attract skilled applicants and to deter unskilled ones.

JEL codes: J64, J22, J42, E24.

Stefano Banfi
Benjamín Villena-Roldan

Keywords: directed search, online job board, segmentation., wage posting