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Skeptical Employers: Experimental Evidence on Biased Beliefs Constraining Firm Growth.
- Source :
- Review of Economics & Statistics; Sep2024, Vol. 106 Issue 5, p1352-1368, 17p
- Publication Year :
- 2024
-
Abstract
- Does low trust in workers discourage firms from hiring? We conduct an experiment in Ghana with real entrepreneurs who have the option to hire anonymous workers for a trivial but tedious task. Shirking attracts no penalty and completion of the task is an indicator of trustworthiness. We elicit employers' expectations and study how they change with random signals of workers' previous behavior. We find that employers underestimate workers' trustworthiness, which reduces hiring and profits. Negative signals lower employers' expectations, while positive signals do not affect them. This asymmetry can help to sustain an equilibrium with limited experimentation and biased beliefs. [ABSTRACT FROM AUTHOR]
- Subjects :
- BUSINESSPEOPLE
TRUST
EMPLOYERS
EXPECTATION (Psychology)
EQUILIBRIUM
Subjects
Details
- Language :
- English
- ISSN :
- 00346535
- Volume :
- 106
- Issue :
- 5
- Database :
- Complementary Index
- Journal :
- Review of Economics & Statistics
- Publication Type :
- Academic Journal
- Accession number :
- 179513841
- Full Text :
- https://doi.org/10.1162/rest_a_01219