Labor contracts: Reducing information asymmetries in the youth labor market of jordan with psychometrics and skill based tests

Matthew Groh, David McKenzie*, Tara Vishwanath

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

15 Scopus citations

Abstract

Jordan's labor market for educated youth is characterized by high levels of unemployment, long periods of job search, and firms complaining that youth often lack the appropriate interpersonal and work skills. Search and matching theory offers a potential explanation: if education systems are such that graduates find it difficult to signal competence and achievement through grades and the quality of their institution, then employers might have difficult matching with suitable candidates, resulting in high unemployment.We developed and tested a labor market screening and matching service in Amman, Jordan, which aimed to generate higher employment for educated youth by reducing these matching frictions. This paper examines the first step in this process, which involved testing unemployed, tertiary-educated, youth on mental ability, English proficiency, soft skills, Excel ability, and also measuring their big five personality traits. We show that these measures have predictive power for subsequent employment and for earnings conditional on employment, even after conditioning on major, university, and other controls. Psychometric testing therefore offers the potential to reduce information asymmetries that result in labor market matching frictions.

Original languageEnglish (US)
Pages (from-to)S106-S117
JournalWorld Bank Economic Review
Volume29
DOIs
StatePublished - 2015

ASJC Scopus subject areas

  • Accounting
  • Development
  • Finance
  • Economics and Econometrics

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