Skeptical Employers: Experimental Evidence on Biased Beliefs Constraining Firm Growth
Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
Standard
Skeptical Employers: Experimental Evidence on Biased Beliefs Constraining Firm Growth. / Caria, Stefano A.; Falco, Paolo.
I: The Review of Economics and Statistics, 2024.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
Harvard
APA
Vancouver
Author
Bibtex
}
RIS
TY - JOUR
T1 - Skeptical Employers: Experimental Evidence on Biased Beliefs Constraining Firm Growth
AU - Caria, Stefano A.
AU - Falco, Paolo
PY - 2024
Y1 - 2024
N2 - 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.
AB - 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.
U2 - 10.1162/rest_a_01219
DO - 10.1162/rest_a_01219
M3 - Journal article
JO - Review of Economics and Statistics
JF - Review of Economics and Statistics
SN - 0034-6535
ER -
ID: 321938166