Article | Journal of Economic Behavior & Organization | January 2008

Nonemployment Stigma as Rational Herding: A Field Experiment

by Felix Oberholzer-Gee

Abstract

Long spells of unemployment are known to reduce the likelihood of re-employment, but it is difficult to discern the reasons for this observation. Using an experimental method that controls for search intensity and possible discouragement of job applicants, I document that job market opportunities for the nonemployed diminish rapidly over time. In this experiment, duration dependence is solely due to firm perceptions. Why do firms view long spells of nonemployment as negative signals? Rational herding is one important factor. Managers believe that unemployed applicants were previously interviewed, and if the applicants were productive, they would have been hired.

Keywords: Job Search; Job Cuts and Outsourcing; Employment; Cognition and Thinking; Perception; Creativity; Human Needs; Job Interviews; Selection and Staffing; Recruitment; Managerial Roles; Judgments; Employment Industry;

Citation:

Oberholzer-Gee, Felix. "Nonemployment Stigma as Rational Herding: A Field Experiment." Journal of Economic Behavior & Organization 65, no. 1 (January 2008): 30–40.