Information asymmetries about workers’ skills can adversely affect both match quality and equity in labor markets. Reference letters from former employers could play a role in alleviating these asymmetries, but they are rarely used in developing country settings. We conduct a series of field experiments to investigate the value and usage of standardized reference letters among young job seekers in South Africa. A resume audit study finds that including a reference letter with the application increases employer call-backs by 60%. Women, traditionally excluded from many referral networks, particularly benefit: firms pay closer attention to the content of letters sent by women and increase response rates by 89%. A second experiment, which encourages job seekers to obtain and use a reference letter, finds similar results. Men are not more likely to find jobs, but employment rates for women who have reference letters double, thus fully closing the employment gender gap in our sample after three months. Letters are effective because they provide accurate information about workers' skills that firms use to select applicants of higher ability, unless they deem letters to be implausibly positive. Despite these positive findings, reference letters are not widely adopted, partly because job seekers underestimate their potential value.
Using a unique data set of classified ads in South Africa, I explore whether employers discriminate against immigrants in the hiring process. I develop a quasi-experimental method to estimate discrimination exploiting variation in the applicant pool composition due to the timing of postings. Consistent with a tournament models in which immigrants are penalized, I find that both foreigners and natives benefit from being pooled with foreign job seekers. Next, I test whether discrimination affects search behavior. Controlling for location fixed effects, I find suggestive evidence for sorting: immigrants search further away and higher discrimination in the residential area is positively correlated with the decision to search in different suburbs. This additional cost to job seekers has not been explored in the discrimination literature.
This paper tests experiential learning as a debiasing tool against gambling and lottery behavior in South Africa. We implement a simple, interactive dice game that simulates worsening winning odds of rolling sixes as more dice are added to the game. The analysis exploits two levels of exogenous variation, first from random assignment into the debiasing game, and second from the number of rolls it takes to obtain the sixes. Treated individuals who needed above-median number of rolls to obtain simultaneous sixes are significantly less likely than the control group to gamble or play the lottery in the following year. The converse is true for individuals who needed below-median number of rolls, suggesting a perverse treatment effect among this group. We also find suggestive evidence that the debiasing affected the sensitivity to varying winning odds. Changes in entertainment utility or risk preferences cannot explain these findings, rather the results are consistent with changes in risk beliefs.
In an attempt to divide and marginalize the black opposition, the apartheid regime forcefully relocated some 3.5 million South Africans to rural homelands. Using newly geocoded data to explore long-term effects of what is considered one of history's largest social engineering exercises, I show that former resettlement communities have higher levels of social capital than surrounding communities as measured by levels of trust and crime. Effects are larger for people born after 1975 who did not witness the forced removals suggesting that effects persist and are not the result of the act of resettlement. Exploring causal mechanisms, I document that resettlement areas are more ethnically diverse and that diversity is positively correlated with measures of social capital only in areas affected by relocation. The formation of new support networks and adoption of a shared identity as displaced people may explain why relocation communities have higher levels of social capital despite potential short-term conﬂict over resources. These findings are important as solidarity among surpressed people is believed to be a critical factor in explaining the demise of the apartheid regime.
Using South Africa’s ﬁrst nationally representative panel data set, I ﬁnd that the presence of pension recipients in the household reduces the probability of employment of both previously employed and unemployed prime-aged adults. Adverse employment eﬀects are found for both salaried and self-employed workers, making it unlikely that liquidity constraints explain low rates of entrepreneurship. Exploiting institutional features of the disability grant to isolate the pension’s income eﬀect suggests that the eﬀects operate through the income mechanism by increasing reservation wages and reducing hours worked.
M.Abel, Blair M, Fabregas R, Gumede K, Leibbrandt M. Youth Employment in South Africa. In: Youth and Employment in Sub-Saharan Africa: Working but Poor. Routledge Studies in Development Economics ; 2014.