Abstract
We investigate a distortion in the labour market that is rampant in developing countries and occurs in the form of inaccurate estimation of the innate talents of employees. We characterise the optimal level of difficulty in a predictive task that an employer, who acts as the evaluator, must choose in order to have the least noise in the talent estimation process. Contrary to the standard noise minimization result, our model re affirms the staffing policy of throwing employees in the deep end. We also find that the evaluator will not benefit from knowing the result of the predictive task set from beforehand. JEL: D82, D83
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