The value of reference letters

Author(s): Rulof Burger , Martin Abel, Patrizio Piraino

Stellenbosch Working Paper Series No. WP06/2017
Publication date: June 2017
Abstract:
We show that reference letters from former employers alleviate information asymmetries about workers’ skills and improve both match quality and equity in the labor market. A resume audit study finds that using a reference letter in the application increases callbacks by 61%. Women disproportionately benefit. Letters are effective because they provide valuable information about workers’ skills that employers use to select applicants of higher ability. A second experiment, which encourages job seekers to obtain and use a reference letter, finds consistent results. In particular, employment rates for women who obtain letters double, fully closing the gender gap in our sample.

JEL Classification:
D83, J24, M51

Keywords:
Unemployment, references, South Africa, active labour market policies