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Sceptical employers : experimental evidence on biased beliefs constraining firm growth
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Caria, Stefano and Falco, Paolo (2022) Sceptical employers : experimental evidence on biased beliefs constraining firm growth. Review of Economics and Statistics . doi:10.1162/rest_a_01219 ISSN 0034-6535. (In Press)
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Official URL: https://doi.org/10.1162/rest_a_01219
Abstract
Does low trust in workers discourage firms from hiring? We conduct an experiment in Ghana with real entrepreneurs who have the option to hire anonymous workers for a trivial but tedious task. Shirking attracts no penalty and completion of the task is an indicator of trustworthiness. We elicit employers' expectations and study how they change with random signals of workers' previous behaviour. We find that employers underestimate workers' trustworthiness, which reduces hiring and profits. Negative signals lower employers' expectations, while positive signals do not affect them. This asymmetry can help to sustain an equilibrium with limited experimentation and biased beliefs.
Item Type: | Journal Article | ||||||
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Subjects: | H Social Sciences > HD Industries. Land use. Labor | ||||||
Divisions: | Faculty of Social Sciences > Economics | ||||||
Library of Congress Subject Headings (LCSH): | Industrial management -- Ghana, Corporations -- Ghana, Labor demand -- Ghana, Small business -- Ghana | ||||||
Journal or Publication Title: | Review of Economics and Statistics | ||||||
Publisher: | MIT Press | ||||||
ISSN: | 0034-6535 | ||||||
Official Date: | 26 July 2022 | ||||||
Dates: |
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DOI: | 10.1162/rest_a_01219 | ||||||
Status: | Peer Reviewed | ||||||
Publication Status: | In Press | ||||||
Reuse Statement (publisher, data, author rights): | This is the author’s final version, and the article has been accepted for publication in Review of Economics and Statistics. | ||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||
Date of first compliant deposit: | 18 May 2022 | ||||||
Date of first compliant Open Access: | 19 May 2022 | ||||||
RIOXX Funder/Project Grant: |
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