How important are matching frictions in the labor market? Experimental & non-experimental evidence from a large Indian firm

This paper provides evidence of matching frictions in the Indian labor market. Using several methods to elicit genuine preferences of job-seekers over jobs, we show that: (a) there is substantial variation in job-seekers preferences over the same jobs; and (b) placement officers, responsible for placing job-seekers in jobs, have poor knowledge of it. Providing placement offers with this information improves matching of job-seekers to interviews, even after taking into account redistribution of jobs across job-seekers. Treated job-seekers get more preferred jobs and retain them in the short run (three months), but not in the longer run (six months). •There is substantial variation in job-seekers’ preferences over the same set of jobs.•These preferences can be elicited through an incentivized job-ranking exercise.•Intermediaries (like placement officers) have poor knowledge of these preferences.•Providing information on job-seekers’ preferences improves placement outcomes.•There is no improvement in job retention outcomes in the longer run.