Information asymmetry and frictions in the labour market are considered great obstacles to efficiency and are sources of unemployment as well as underemployment. For instance, information regarding a job seeker’s work ethic is difficult to observe for employers during an interview. It is extremely difficult for a job seeker to signal his/her true ability, especially soft skills, to potential employers. In collaboration with BRAC Uganda, GLM|LIC researchers implemented a carefully-designed field experiment to study the effects of soft skills certificate on both job seekers and employers in Uganda.
Vittorio Bassi (University of Southern California), Aisha Nansamb (BRAC NGO) and Imran Rasul (University College London) find that firm managers with higher cognitive ability, who value soft skills more and are more profitable, respond to the certificates. While certificates lead to an estimated 11% increase in income, the probability of finding a job is not affected. In addition, a cost-benefit analysis shows that, after two years, the benefit of the certificate dominates the cost. Should the certificate be compulsory based on the analysis?
A non-technical summary of GLM|LIC Working Paper No. 29 “Information Frictions in the Labor Market: Evidence from a Field Experiment in Uganda” is now available free of charge.