Abstract:

Referred workers are more likely than nonreferred workers to be hired, all else equal. In three field experiments in an online labor market, we examine why. We find that referrals contain positive information about worker performance and persistence that is not contained in workers' observable characteristics. We also find that referrals perform particularly well when working directly with their referrers. However, we do not find evidence that referrals exert more effort because they believe their performance will affect their relationship with their referrer or their referrer's position at the firm.