Skeptical Employers: Experimental Evidence on Biased Beliefs Constraining Firm Growth

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Skeptical Employers: Experimental Evidence on Biased Beliefs Constraining Firm Growth. / Caria, Stefano A.; Falco, Paolo.

I: The Review of Economics and Statistics, 2023.

Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt

Harvard

Caria, SA & Falco, P 2023, 'Skeptical Employers: Experimental Evidence on Biased Beliefs Constraining Firm Growth', The Review of Economics and Statistics. https://doi.org/10.1162/rest_a_01219

APA

Caria, S. A., & Falco, P. (2023). Skeptical Employers: Experimental Evidence on Biased Beliefs Constraining Firm Growth. The Review of Economics and Statistics. https://doi.org/10.1162/rest_a_01219

Vancouver

Caria SA, Falco P. Skeptical Employers: Experimental Evidence on Biased Beliefs Constraining Firm Growth. The Review of Economics and Statistics. 2023. https://doi.org/10.1162/rest_a_01219

Author

Caria, Stefano A. ; Falco, Paolo. / Skeptical Employers: Experimental Evidence on Biased Beliefs Constraining Firm Growth. I: The Review of Economics and Statistics. 2023.

Bibtex

@article{c2c5bd0348b74958af7c51421e210994,
title = "Skeptical Employers: Experimental Evidence on Biased Beliefs Constraining Firm Growth",
abstract = "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.",
author = "Caria, {Stefano A.} and Paolo Falco",
year = "2023",
doi = "10.1162/rest_a_01219",
language = "English",
journal = "Review of Economics and Statistics",
issn = "0034-6535",
publisher = "MIT Press",

}

RIS

TY - JOUR

T1 - Skeptical Employers: Experimental Evidence on Biased Beliefs Constraining Firm Growth

AU - Caria, Stefano A.

AU - Falco, Paolo

PY - 2023

Y1 - 2023

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