Alessandra Bonfiglioli, Gino Gancia, 08 July 2014

Differences in labour market and firm statistics between the US and Europe are easy to dismiss as cultural. This column applies an equilibrium model of worker screening and effort to cross-country data, showing that a large chunk of observed differences can be explained by the strategic interaction between firm and worker strategies. Evidence suggests that the US is in a high-screening, high-effort equilibrium, while southern Europe is in the complementary equilibrium. Perhaps culture is more economic than we might assume.

Abigail Wozniak, 24 May 2014

There is concern that worker screening may aggravate discrimination against disadvantaged groups, but its effects may be counterintuitive. This column presents recent evidence on the effect of drug testing on hiring practices by race in the US. Removing this channel of information asymmetry allows employers to distinguish workers by this relevant characteristic rather than relying on their priors; the result is that hiring of non-drug-using African-Americans increases, at the expense of white women.

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