Discretion in Hiring

Mitchell Hoffman, Lisa B. Kahn, Danielle Li

Quarterly Journal of Economics

2018

Who should make hiring decisions? We propose an empirical test for assessing whether firms should rely on hard metrics such as job test scores or grant managers discretion in making hiring decisions. We implement our test in the context of the introduction of a valuable job test across 15 firms employing low-skill service sector workers. Our results suggest that firms can improve worker quality by limiting managerial discretion. This is because, when faced with similar applicant pools, managers who exercise more discretion (as measured by their likelihood of overruling job test recommendations) systematically end up with worse hires.

Human Capital, Skills, Occupational Choice, Labor Productivity, Personnel Economics: Firm Employment Decisions, Promotions, Economic History: Financial Markets and Institutions: General, International, or Comparative, Economic History: Financial Markets and Institutions: U.S., Canada: 1913-, Economic History: Financial Markets and Institutions: Europe: Pre-1913, Economic History: Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy: Latin America, Caribbean, Economic History: Government, War, Law, International Relations, and Regulation: U.S., Canada: Pre-1913, Economic History: Government, War, Law, International Relations, and Regulation: Europe: 1913-

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