Agency and Workplace Diversity: Evidence from a Two-Sided Audit

Abstract

Firms increasingly delegate job screening to third parties. Outsourced recruiters introduce agency issues that can distort worker/employer matching. We present a simple model illustrating the tension between recruiters' use of private information about candidate preferences, and reputational incentives to impress employers. We then execute a novel two-sided audit experiment by directly engaging recruiting intermediaries. We show that agents' career concerns strongly shape selection decisions. Recruiters over-interview employer-favored candidates unlikely to reciprocate interest, while under-select candidates with stronger mutual interest. By changing outside offers, recruiters' career concerns affect candidates' negotiating leverage. We conclude by discussing extensions of our audit methodology.