Signalling and Job Markets

Greg Mankiw publishes some correspondence about the American Economic Association’s ‘signalling’ initiative.

The basic idea of a signaling mechanism is that there is a big part of the market in which departments, in allocating scarce interview slots, have to form an assessment not only of how promising a student looks, but also of how likely that student is to be interested in them. …

Of course students can send any signals they want in their cover letters, but because every cover letter expresses interest, that may be of limited help to departments in separating the signals from the noise. To some extent that may also apply to information in emails and letters from advisors. Those channels can all convey valuable signals of interest, of course. The new signaling mechanism is just a supplement to the traditional ways of signaling interest, and may be of most help to students who are interested in places to which they don’t have other reliable means of conveying their interest. Because they can send a maximum of two signals through the AEA mechanism, the signals may convey some information.

The main target users of this mechanism are job candidates who might be turned down for jobs they would quite like because they (the candidates) are perceived to be unattainable. Consider, e.g., a student with pretty glowing letters from a top school who has always wanted to live in college town X where, say, they went to middle school. The college in that town might assume (reasonably) that the student will get an offer from a more prestigous school, and so it isn’t worth interviewing them. The result is bad for both the student (who actually prefers X to the more prestigous school) and the school (who prefers the student to who they hire). Of course the student could try to communicate this preference through their cover letter, but it is hard to know how seriously to take such letters since the candidate may say something similar to everyone. The signalling mechanism gets around that.

It’s an interesting idea for considering for the APA. I’m worried (as some are about the AEA model) about whether people would be punished for not signalling an interest in a school. But I can also see how it might ameliorate some of the effects of assumptions about prestige in the job market.

3 Replies to “Signalling and Job Markets”

  1. Yikes! The intention is nice and the mechanism clever, but I suspect it would just become another thing for applicants to stress and game about and for hiring departments to get huffy about and misinterpret.

  2. So this might help benefit applicants who are perceived as very desirable hires (whether or not due to their philosophical quality) who want to go somewhere other than a top department. Fair enough, but I wouldn’t have thought that would amount to a very large number of people, and the mechanism surely risks harming the chances of pretty much everyone else.

    Those applicants perceived as less desirable (for whatever reason) need to hedge their bets by applying as widely and enthusiastically as possible, but this would make it more difficult for them to do that convincingly.

    Given that those who are perceived as desirable hires already have a lot going for them, can it really be a good idea to give their chances of getting what they want an additional boost, at the expense of those who lack the advantages they enjoy?

    On the other hand, there is prima facie a potential benefit to departments, who get more information about who’s really keen on them. But do they really? If I were faced with this system, I wouldn’t necessarily signal the two depts I most wanted to be in; I’d probably signal two of the ones I liked that I thought I had a chance with. Or, perhaps, one such department and one “insurance” department. But once hiring depts know that this sort of thing could be going on, the potential to gain significant information from a signal is much reduced. Except in the special case where a very desirable candidate signals a considerably less prestigious institution than you’d expect. (And even then, the mechanism relies on the receiving dept having the humility to realize that the candidate is out of their league!)

  3. Right on, Carrie! In addition, I imagine that most of those candidates who are genuinely likely to be perceived as unattainable have other ways of indicating their interest in particular places, such as personal contacts, which aren’t available in the same way to everyone else. (Imagine the difference between Hot Shot from Top-Ranked U shooting an e-mail to an acquaintance in their Dream Town and indicating interest vs. Average Jane from Mid-Ranked U doing the same.) Adding an official signalling mechanism would almost certainly hurt more than it helped. And who wants the job market to be more complicated?!

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