IZA Newsroom

IZA – Institute of Labor Economics

High returns to making job applications easier

by

Job search is a central feature of labor markets, and barriers to job search can have important effects on employment, earnings, and productivity. Economists have shown that factors like financial search costs and incomplete information are important barriers to search. This suggests that environments offering cheap, fast, information-rich job search might improve search outcomes. Online search and matching platforms offer exactly these features, but job application rates remain low even on these platforms.

Psychological costs of starting job applications

A recent IZA discussion paper by Kate Vyborny, Robert Garlick, Nivedhitha Subramanian, and Erica Field explores how psychological costs of starting job applications might act as a barrier to high-return search. Using a novel job search platform in Pakistan called “Job Talash,” the authors recruited platform users through a representative survey of over 50,000 households in Lahore. These jobseekers varied widely in baseline employment and job search status, ranging from employed and searching to non-employed and non-searching.

Each month, jobseekers on the platform receive a text message about new job vacancies that match their qualifications and preferences. The message invites them to phone the platform’s call center to apply for these matched jobs. Some jobseekers are randomly assigned to also receive a phone call after their text message. The phone call repeats the information from the text message and invites them to apply immediately, without providing any additional information or encouragement. Thus, the treatment only changes how jobseekers start job applications, moving them from an active role to a passive role.

Insights into job application behavior and outcomes

The phone call treatment increases the job application rate by a dramatic 600%. Control group jobseekers apply to only 0.2% of all vacancies that match their qualifications and preferences, while treatment group jobseekers apply to a much higher 1.5% of all matched vacancies. It’s natural that jobseekers don’t apply to many matched vacancies, as the platform deliberately matches them with numerous jobs based on broad criteria.

Surprisingly, the return to these additional applications remains roughly constant rather than decreasing. Roughly 6% of applications lead to interview invitations in both the control and treatment groups, even though treated jobseekers send many more applications. The same pattern holds for interview invitations to jobs with desirable features like higher salaries, benefits, and shorter commutes. Unfortunately, the platform doesn’t track whether these interview invitations lead to job offers.

Explaining low application rates

Roughly constant returns to job search raise a question: why don’t untreated jobseekers apply to more jobs, especially because applying on the platform is cheap and fast? The authors argue that psychological costs of starting applications are the most likely explanation. Existing research suggests multiple types of psychological costs that might be reduced by treatment. Attention costs may decrease because treated jobseekers don’t need to focus on text messages or set time aside to decide whether to apply. The phone call may prevent procrastination and missed application deadlines. And the phone call allows jobseekers to apply immediately, with less time to anticipate and fear rejection.

Many other possible explanations for these results can be ruled out. Monetary and time costs are unlikely explanations for why untreated jobseekers don’t send more applications: applying on Job Talash is already cheap and fast, and other treatments designed to reduce monetary and time costs don’t increase applications much. The phone call treatment doesn’t change other ways jobseekers use the platform: treated jobseekers don’t apply to different types of jobs, update their CVs more often, or hold different beliefs about the value of applying on the platform.

Implications for job search platforms and policies

The findings in this study show that simple changes to job search processes can increase search and improve search outcomes. This has important implications for designing job search policies and platforms. Most obviously, job search platforms can simplify the process of starting job applications or making decisions. More broadly, the results highlight the importance of considering the psychology of job search, especially when combined with existing research showing that simple plans and reminders can increase job search.

The hidden costs of classroom disruptiveness

by

Classrooms are dynamic environments where students not only learn from teachers but also influence one another’s academic and personal development. While much research has focused on the benefits of high-achieving peers, a new IZA discussion paper by Sofoklis Goulas, Silvia Griselda, Rigissa Megalokonomou, and Yves Zenou examines the opposite end of the spectrum: the impact of disruptive classmates. It investigates how disruptive peers shape the academic outcomes and long-term educational choices of other students in the classroom.

The analysis draws on data from high schools in Greece, where students are randomly assigned to classrooms based on the alphabetical order of their surnames at the start of high school. This randomization creates a natural experiment, allowing the causal effects of peer disruptiveness to be isolated from factors like self-selection or other unobserved variables. Disruptiveness is quantified by suspension hours accumulated in grade 9 (the final year of elementary school), enabling the study to measure how exposure to varying levels of peer disruptiveness impacts academic performance and long-term decisions.

Lower scores, grade repetition, and delayed graduation

The findings reveal significant and far-reaching effects. Students in classrooms with more disruptive peers experience lower academic achievement, including declines in test scores, increased likelihood of grade repetition, and a reduced probability of on-time high school graduation. These academic challenges highlight how disruptive classroom environments negatively affect all students, not just those directly engaging in disruptive behaviors.

The influence of disruptive peers extends beyond high school, shaping students’ higher education and career trajectories. Exposure to disruptive classrooms reduces the likelihood of pursuing competitive academic specializations or enrolling in selective postsecondary programs, such as STEM fields or other rigorous disciplines. These findings indicate that the adverse effects of classroom disruptiveness are not short-lived but persist, influencing students’ long-term educational and career outcomes.

Who suffers the most from classroom disruptiveness?

The study also identifies groups that are particularly vulnerable to these effects. Students from low-income areas, those in larger classrooms, and those with fewer female peers face amplified negative impacts from disruptive classmates. These compounding disadvantages underscore the inequities in educational environments where disruptiveness is prevalent, making it harder for certain groups to succeed.

To explore the mechanisms behind these effects, a lab-in-the-field experiment was conducted in high schools in Greece. Students were randomly exposed to scenarios with varying levels of peer disruptiveness, from one disruptive classmate to a third of the classroom. Participants rated the perceived or expected impact of disruptiveness on non-cognitive outcomes. The experiment found that higher levels of peer disruptiveness significantly reduced students’ motivation, study effort, college aspirations, and interest in science-related studies and careers. Students seated closer to disruptive peers experienced particularly pronounced negative effects, highlighting the localized nature of peer dynamics within classrooms.

This study underscores the profound impact of classroom environments and peer behaviors on students’ academic and career trajectories. It emphasizes the importance of addressing disruptiveness in educational settings, particularly for vulnerable populations who are disproportionately affected. By fostering supportive and focused learning environments, educators and policymakers can mitigate the long-term consequences of peer disruptiveness, ensuring equitable opportunities for all students to succeed.

How college proximity shapes enrollment and degree attainment

by

While the economic benefits of a college degree have grown significantly in recent decades, racial and socioeconomic disparities in higher education attainment persist and, in some cases, have widened. A new IZA discussion paper by Riley Acton, Kalena E. Cortes, Lois Miller, and Camila Morales sheds light on the critical but often overlooked role of college proximity in shaping enrollment and degree outcomes, demonstrating how geographic access influences educational attainment across demographic groups.

Community college deserts reduce opportunities for many

Students living in “community college deserts” — areas without a two-year public college within a 30-minute drive — face significant barriers to postsecondary success. The research, based on data from Texas public high school graduates between 2013 and 2017, shows that these students are 2.7 percentage points less likely to complete an associate’s degree within six years of high school graduation. This gap is driven by lower enrollment rates in two-year colleges and reduced credit accumulation among those who do enroll.

Disadvantaged groups face the greatest setbacks

The absence of nearby community colleges impacts students differently depending on their background. Higher-income, White, and Asian students often compensate by enrolling in four-year universities, maintaining their overall degree completion rates. However, economically disadvantaged, Black, and Hispanic students frequently forgo postsecondary education entirely when community colleges are inaccessible. This results in reduced completion rates for both associate’s and bachelor’s degrees, underscoring the importance of community colleges as pathways to higher education.

The overall impact is stark: living in a community college desert is associated with a 3.3 percentage point decline in degree attainment for underrepresented minority (URM) students and a 2.6 percentage point drop for economically disadvantaged students. These effects persist up to eight years after high school graduation, illustrating the long-term consequences of limited geographic access.

Expanding community colleges can close gaps

Community colleges play a crucial “democratizing” role, providing essential access to higher education for underrepresented groups. Policies that prioritize expanding the geographic reach of community colleges, particularly in racially and economically diverse areas, could help mitigate persistent disparities in educational attainment. Interventions that reduce geographic barriers, such as building new campuses or enhancing transportation options, offer a promising path to fostering greater equity and improving economic mobility.

This research emphasizes the urgent need to integrate geographic access into higher education policy to ensure that all students, regardless of background or location, have the opportunity to succeed.

Entry restrictions in healthcare improve equitable access but reduce service quality

by

Entry restrictions in healthcare regulate where general practitioners (GPs) can establish practices, aiming to address inequities in the distribution of medical services. By preventing oversaturation in attractive urban areas, these policies encourage GPs to settle in underserved rural regions. However, such restrictions come at a cost: they limit competition, which could weaken incentives for delivering high-quality care.

A recent IZA discussion paper by Eduard Brüll, Davud Rostam-Afschar, and Oliver Schlenker examines how reducing the threat of competition—the potential for new GPs to enter a market—affects service quality and GP behavior in Germany. Their findings reveal a trade-off between equitable access and competitive pressures that drive quality.

Entry restrictions reduce the threat of competition

The study focuses on Germany’s needs-based planning system, where regions with a GP-to-population ratio exceeding 110% block new GPs from entering. This creates a natural experiment: areas just above and below the threshold have similar levels of current GP competition but differ in exposure to potential new entrants.

In entry-restricted regions, the probability of new GPs entering drops by 20 percentage points. However, the number of GPs per capita and other measures of actual competition remain unchanged. This means restrictions successfully reduce the threat of competition without altering the total supply of GPs.

Local monopolists lower service quality when competition is blocked

The study finds that GPs who face no nearby competitors—referred to as local monopolists—respond to reduced competition by lowering their service quality. In these areas, patients report lower satisfaction with GP friendliness, less time spent during consultations, and lower quality of medical advice.

In contrast, GPs in already competitive regions, where direct competition remains strong, show no significant changes in behavior when entry restrictions are imposed. The findings highlight how competition pressures GPs to maintain higher standards of care.

No impact on primary care access or regional health outcomes

Despite localized declines in service quality, entry restrictions do not affect broader access to care. GP working hours and the total volume of services provided remain unchanged, likely due to the reimbursement structure of Germany’s statutory health insurance (SHI) system.

The study also finds no significant effects on regional health outcomes, such as hospitalization or mortality rates. This is partly because only 20% of GPs operate as local monopolists, limiting the overall impact of entry restrictions on patient health.

Policymakers must balance equity and competition to improve care

The findings underscore the challenge of designing policies that improve access to healthcare without compromising service quality. Entry restrictions, while effective at addressing geographical inequities, inadvertently allow local monopolists to reduce their effort and performance.

To address these unintended consequences, policymakers could design performance-based incentives that reward high-quality care, even in low-competition areas. Providing targeted support for underserved regions, such as financial subsidies or professional development opportunities, could attract high-performing GPs without relying solely on restrictive regulations. Additionally, periodically reviewing entry thresholds and promoting internal competition—through benchmarking or collaboration—could help maintain competitive pressure and service standards.

Conclusion: Competitive pressure is essential for sustaining quality

While entry restrictions aim to ensure equitable access to care, they can unintentionally reduce service quality by weakening competition. Policymakers must navigate this trade-off carefully, ensuring that access does not come at the expense of quality. By preserving competitive incentives even in regulated markets, healthcare systems can achieve both equitable and high-quality care.

How parental role models shape gender inequality in labor markets

by

The persistent gender gap in labor market outcomes, especially the child penalty — the career setbacks women experience compared to men after becoming parents — remains a critical issue in understanding and addressing gender inequality. In a recent IZA discussion paper, Henrik Jacobsen Kleven, Giulia Olivero, and Eleonora Patacchini explore the formative role of parental role models during adolescence in shaping these penalties.

Using longitudinal data from U.S. adolescents tracked from middle and high school into adulthood, the researchers leverage quasi-random variation in classroom exposure to peers with working mothers or fathers. The study finds that adolescents exposed to a higher proportion of peers with working mothers during their school years experience significantly smaller child penalties in adulthood.

Working fathers reinforce traditional gender roles

In contrast, exposure to peers with working fathers amplifies the child penalty, reinforcing traditional gender roles that associate men with breadwinning and women with caregiving roles. This dual influence underscores how male and female parental role models shape diverging career trajectories for women.

The findings persist across various model specifications and control factors, confirming that the observed effects are indeed tied to parental work behavior rather than correlated characteristics like education or income. The research provides compelling evidence that local and immediate social environments, such as the parental employment behaviors of peers, play a crucial role in shaping gender-role ideals. These ideals, in turn, have long-lasting effects on labor market trajectories.

CEO pay disclosure drives wage inequality

by

Policies mandating CEO pay disclosure are often designed to promote transparency and curb wage inequality by addressing concerns over excessive executive compensation. However, a recent IZA discussion paper by Agata Maida and Vincenzo Pezone reveals a stark contrast between the intended and actual effects of such reforms. Instead of reducing income disparities, the disclosure of CEO pay in Italy following a 1998 reform disproportionately benefited top earners within firms, ultimately exacerbating wage inequality.

High CEO pay leads to uneven wage growth

The study finds that firms with high-disclosed CEO compensation experienced significant wage increases at the top end of the pay scale. Workers in the top 5% and 1% of the wage distribution saw notable gains, while the impact on average wages was marginal. As a result, wage inequality within these firms expanded, benefiting the highest earners disproportionately.

Bargaining power as the catalyst

The researchers attribute this effect to shifts in bargaining power rather than changes in workforce composition. High-earning employees, particularly those with access to top management, leveraged the transparency to negotiate higher wages, further skewing the pay distribution.

Regional and experience-based variations

The impact of CEO pay disclosure was not uniform across all workers. Less experienced employees and those based in the primary regions of a firm’s operations were more likely to experience wage increases at the top end. This highlights how proximity to company headquarters and limited prior knowledge of pay structures amplify the effects of transparency.

Assessing dishonesty in cocoa value chains

by

Dishonest practices in agricultural value chains undermine trust, reduce transparency, and disrupt fair trade. In the cocoa industry, where middlemen play a crucial role in connecting farmers to cooperatives and exporters, these behaviors can distort the flow of certified products and inflate profits at the expense of ethical standards.

To address this issue, Delphine Boutin, Marine Jouvin and Louis Olié conducted a lab-in-the-field experiment in Côte d’Ivoire, the world’s largest cocoa producer. Their IZA discussion paper focuses on understanding the extent and drivers of dishonesty among middlemen and evaluating potential solutions to curb it.

Dishonesty is widespread, but not universal

The study reveals that dishonesty among cocoa middlemen is common but not uniform. Using a modified “die-under-cup” task, the researchers observed that 78% of participants cheated at least once. Most troublingly, 59% of middlemen consistently engaged in dishonest behavior when faced with unfavorable outcomes. In contrast, 22% of participants maintained honesty even when it meant financial disadvantage, pointing to the influence of intrinsic values or ethical considerations.

Who cheats, and why?

The propensity to cheat varies based on individual characteristics. Younger middlemen, those with higher risk tolerance, and those without strong religious affiliations were more likely to engage in dishonest behavior. These findings suggest that age, attitudes toward risk, and moral frameworks play a significant role in shaping decision-making within the cocoa value chain.

Monitoring and penalties can work, but limits remain

The introduction of monitoring mechanisms and financial penalties led to a significant reduction in dishonest behavior. Middlemen were 42% less likely to cheat when there was a chance they could be observed and 52% less likely when observation was paired with financial penalties. However, 59% of participants continued to cheat regardless of these deterrents, highlighting the limits of these measures in isolation. The experimental nature of the setup, where the stakes were limited compared to real-world scenarios, may also explain why such a large group remained unaffected.

Implications for tackling dishonesty in global value chains

This research underscores the potential of combining monitoring and penalties to reduce dishonest behavior in agricultural supply chains. However, it also raises questions about the broader applicability and effectiveness of such measures. Addressing entrenched dishonesty may require more robust interventions, including stricter penalties, enhanced traceability systems, and initiatives that promote ethical decision-making.

By focusing on the cocoa value chain in Côte d’Ivoire, this study provides a foundation for addressing similar challenges in agricultural markets worldwide. Improved transparency and integrity in these systems will be essential for building trust and ensuring fairer outcomes for all stakeholders. According to Reuters, Côte d’Ivoire’s cocoa regulator is currently implementing a reform of the domestic cocoa marketing system that aims at eliminating middlemen to prevent risk and overpayment.

Early inheritances widen the gender wealth gap

by

A recent IZA discussion paper by Charlotte Bartels, Eva Sierminska, and Carsten Schröder explores the persistent gender wealth gap in Germany, uncovering the significant role of inheritance timing in shaping wealth inequalities between men and women. The analysis, based on the German Socio-Economic Panel, provides insights into how wealth accumulation diverges across genders and life stages.

The gender wealth gap: More than earnings

The study reveals that women, on average, possess 40% less wealth than men, a disparity magnified at the top of the wealth distribution. Among the richest 1% in Germany, women comprise less than 30% of individuals. While income and labor market participation play a role, the researchers emphasize the influence of inheritance patterns and lifetime gifts, shedding light on previously overlooked contributors to this inequality.

Timing is key: Inheritance and wealth-building opportunities

The research highlights stark differences in when men and women receive wealth transfers. Men typically inherit earlier in life, providing a critical advantage for wealth-building activities such as entrepreneurship and investment. Conversely, women often inherit later, frequently after the death of a spouse. These later-life inheritances arrive too late to drive substantial wealth accumulation during active, wealth-creating years. Consequently, the average wealth gap conceals a deeper inequality in opportunities available during the prime phases of economic productivity.

Figure: Average wealth by gender and age

Average wealth is similar for young men and women but diverges sharply from ages 40 to 69, with a gap of around €100,000. The disparity narrows again in retirement and older age.

“Wealth creators” vs. “wealth inheritors”

An important distinction arises between “wealth creators,” who build wealth through earnings and investments, and “wealth inheritors,” who rely on gifts and inheritances. Men dominate the “wealth creator” category, particularly at higher wealth levels, while women are more often classified as “wealth inheritors,” reflecting smaller, delayed wealth transfers.

Managerial trust linked to remote work adoption

by

As the COVID-19 pandemic transformed workplaces worldwide, the adoption of remote work varied dramatically between regions and industries. A recent IZA discussion paper by Adam Gill and Oskar Nordström Skans identifies managerial trust as a crucial factor in this divergence.

The study finds a strong association between managers’ beliefs about whether employees can be trusted to work independently without direct oversight and the intensity of work-from-home (WFH) practices. To measure managerial trust, the researchers used survey data from the European Social Survey, focusing on managers’ responses to the question: “Do you think that most people would try to take advantage of you if they got the chance, or would they try to be fair?” Their answers were then linked to regional and occupational variations in WFH intensities.

The findings reveal that countries, regions, and industries where managers exhibited higher trust levels—such as the Nordic nations, Switzerland, and the Netherlands—were more likely to embrace remote work. In contrast, regions in Southern and Eastern Europe, including Bulgaria, Cyprus, and Slovakia, were slower to adopt remote work, reflecting lower levels of managerial trust.

This association holds even after controlling for other dimensions of societal trust and structural factors like broadband access, digital skills, and occupational types. The findings highlight that managerial trust is not merely a reflection of infrastructure or institutions—it is a key correlate of workplace autonomy.

Crucially, the pandemic amplified these dynamics. High-trust regions expanded WFH adoption during the crisis, while low-trust regions failed to “catch up,” reinforcing disparities. The study suggests that fostering managerial trust could unlock the full potential of remote work technologies and practices.

Personality traits and signals as predictors of workplace behavior

by

A recent IZA discussion paper by David L. Dickinson and David Masclet investigates how personality traits and other observable characteristics, such as religiosity or a history of time in prison, shape behaviors critical to workplace settings, including honesty and task effort. Through two online experiments, the researchers explored whether these factors reliably predict workplace-relevant outcomes.

The first experiment contrasted individuals with “dark” personality traits, such as narcissism and psychopathy, with those displaying “light” traits, like humanism and faith in humanity. Results showed that individuals with darker traits were more likely to act dishonestly in an honesty task and were less productive in an effort task compared to their lighter counterparts. These findings highlight the value of personality assessments in identifying tendencies that may affect workplace performance.

The second experiment examined two commonly observed signals: regular participation in religious activities and a history of time in prison. It revealed that individuals with “ex-convict” status were more productive in the effort task than religious participants but were more likely to display dishonest behaviors in certain conditions. This nuanced finding challenges the interpretation of weak signals, demonstrating their predictive complexity.

The study concludes that both personality traits and weak signals can provide useful insights into workplace behaviors, but it emphasizes the importance of recognizing their limitations. While dark personality traits and a history of time in prison were linked to undesirable behaviors in some contexts, they also indicated strengths in some instances, such as with ex-convicts being more productive in a simple effort task than religious types. These findings offer a framework for refining recruitment and workforce management strategies.