Information Frictions and Skill Signaling in the Youth Labor Market

This paper provides evidence that information frictions limit the labor market trajectories of US youth.

This paper provides evidence that information frictions limit the labor market trajectories of US youth. We provide credible skill signals—recommendation letters based on supervisor feedback—to a random subset of 43,409 participants in New York’s summer jobs program. Letters increase employment the following year by 3 percentage points (4.5 percent). Earnings effects grow over four years to a cumulative $1,349 (4.9 percent). We find little evidence of increased job search or confidence; instead, signals may help employers better identify successful matches with high-productivity workers. Pulling youth into the labor market can, however, hamper on-time graduation, especially among low-achieving students. (JEL D82, H75, J13, J24, J31, J64)