Learning to hire? Hiring as a dynamic experiential process in an online market for contract labor

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Abstract
Can employers learn to hire? This article conceptualizes hiring as a dynamic experiential learning process. Instead of examining hiring as a point in time decision, I investigate whether and how employers’ past hiring experiences affect their future decisions. Drawing on evidence from a global online market for contract labor, I argue that employers revise their beliefs regarding job applicants from a particular social category following a negative hiring experience from that social category. I analyze over 16 Million applications from freelancers worldwide for over 2.2 Million jobs from 557,416 employers. I find that employers who have a negative hiring experience with a freelancer from a particular country are subsequently less likely to hire other freelancers from that country. This effect is stronger on hiring for identical subsequent jobs and weaker for other jobs. Most strikingly, evidence from the actual hiring switches following a negative experience and a simulation using data from the observed distribution of freelancers on the platform demonstrate that employers unnecessarily oversteer away from countries given the narrow distribution of observable ability among freelancers. Switches do not result in hiring from a “better” country.

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