Working Paper: NBER ID: w20825
Authors: Camelia M. Kuhnen; Paul Oyer
Abstract: We empirically investigate the effect of uncertainty on corporate hiring. Using novel data from the labor market for MBA graduates, we show that uncertainty regarding how well job candidates fit with a firm’s industry hinders hiring, and that firms value probationary work arrangements that provide the option to learn more about potential full-time employees. The detrimental effect of uncertainty on hiring is more pronounced when firms face greater firing and replacement costs, and when they face less direct competition from other similar firms. These results suggest that firms faced with uncertainty use similar considerations when making hiring decisions as when making decisions regarding investment in physical capital.
Keywords: human capital; hiring decisions; MBA labor market; uncertainty; probationary employment
JEL Codes: G31; J44; M51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Lower replacement costs (G52) | Willingness to hire riskier candidates (M51) |
| Candidate uncertainty regarding fit (D80) | Hiring likelihood (M51) |
| High firing costs (L97) | Impact of candidate uncertainty on hiring likelihood (D79) |