The Effect of Internet Recruiting on the Matching of Workers and Employers

Abstract

More then 25% of unemployed job seekers report using the Internet to look for jobs. This paper examines the impact of the spread of online recruiting on the matching of workers and firms. I develop a model of recruitment in which job seekers have private information about their qualification for different jobs and firms possess imperfect screening technologies. The adoption of Internet recruiting is modeled as reducing application costs to workers and improving screening technology for firms. The reduction in application costs to workers is shown to induce applications from candidates who are relatively less qualified and to decrease the proportion of qualified new hires; however, the improvement in firms' screening technology may offset this effect. Firms may adopt Internet recruiting strategies because of the direct reduction in recruiting costs and because of competition among employers for qualified hires. The implications of the model are empirically examined using personnel data from a large multinational manufacturing firm. Job duration is used as a proxy for match quality. Estimates from Cox duration models indicate that Internet recruits have shorter job duration than observationally equivalent workers hired through employee referrals but similar durations to those hired through print advertising. Propensity score methods show that the types of jobs (occupations) with a larger growth of the use of Internet recruiting show larger declines in expected job durations compared with jobs with less growth of Internet recruiting. This finding is consistent with a key prediction of the model.