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The Experimental Approach to Studying Employers' Hiring Behavior

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The Experimental Approach to Studying Employers' Hiring Behavior

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The Experimental Approach to
Studying Employers’ Hiring Behavior
KLARITA GËRXHANI

Abstract
This essay advocates the use of experimental methods to study labor demand. Experimentation contributes to a better understanding of employers’ hiring behavior by
establishing what is cause and what is effect in observed behavior and allows for
a better grip on the mechanisms underlying the hiring process. Given the difficulties in obtaining information from employers, experiments offer a fruitful alternative
route to collecting information about the hiring process. The limited existing research
provides a basis for new and promising steps into the future. To address research
questions related to employers’ hiring behavior, I propose combining experimental methods; implementing cross-country experimental designs; conducting experiments on online labor markets; and using experimental control to explore the interaction between social context and biological factors. Setting these steps will give
employers’ decisions the attention they deserve when it comes to the important role
that hiring plays in generating labor market (in)equalities.

INTRODUCTION
A typical employment relationship consists of an exchange of labor for
money. The process of establishing such a relationship thus involves both
an employee seeking to offer his or her labor and an employer offering
a position. The first aspect, job seeking, has received abundant scholarly
attention (Granovetter, 1974). Although the latter aspect is a necessary
condition for a job match to take place—without an available job, a
job search cannot succeed—employers’ hiring behavior and strategies
remained under-researched for many decades. Fortunately, this has started
to change.
Bills, Di Stasio, and Gërxhani (2017) provide a recent and extensive
overview of the literature focusing on the demand side of the hiring
process. Studies have by and large been based on observational field
and survey data, but recently a few studies have started to appear that
Emerging Trends in the Social and Behavioral Sciences.
Robert Scott and Marlis Buchmann (General Editors) with Stephen Kosslyn (Consulting Editor).
© 2017 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.

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use (quasi)experimental data. While observational and survey data can
provide rich detail on how employers perceive the information they receive
about potential employees, such data cannot address issues of endogeneity
and self-selection bias, and cannot establish what is cause and what is
effect (Mouw, 2003). Moreover, observing employers’ behavior is quite
difficult in and of itself. Lack of data has been an important hurdle to
studying employers’ hiring behavior in much of social science research.
Compared to employees, employers are more resistant to information
sharing because of time constraints, reluctance to public exposure, or lack
of obvious benefits from collaboration. Although progress has been made,
more effort and creativity are needed to open the black box of employers’
decision-making.
This essay advocates the use of experimental methods to better understand
employers’ behavior. Over the past 20 years, there has been a noticeable
increase in the use of experiments by social scientists to study a rich platter
of phenomena (Jackson & Cox, 2013). The method’s main strength is the
control it provides. Causal knowledge requires controlled variation and
the laboratory allows for tight control over the environment in which
an interaction takes place (Falk & Heckman, 2009). “The experimental
method is extremely powerful, particularly in largely eliminating the
contaminating role of unobserved confounders and thereby making causal
explanation more secure . . . .” (Jackson & Cox, 2013, p. 43). Moreover, the
experimental method allows one to isolate the mechanisms underlying
employers’ hiring behavior, which is hard to achieve based on observational data. Finally, depending on the type of experiment conducted—see
below—experimentation provides a relatively low-cost tool (compared to
observational studies) to better understand employers’ hiring behavior. As
Bills et al. (2017) argue, this understanding is important because employers
play a major role in determining opportunities and (in)equalities in the labor
market.
THE EXPERIMENTAL METHOD
A major goal of empirical research is to find relations between variables.
This is often done using naturally occurring data, survey data, or in-depth
interviews. With such data, the challenge is to establish whether a relation
between variables is causal or merely a correlation. One can attempt to
address the causality issue by applying proper statistical or econometric
techniques. Alternatively, one can generate new data with experimental
control in a laboratory or in the field. The experimental method in the social
sciences collects data on social phenomena in a controlled—laboratory or
field—environment. Like theory and empirics, experiments are used to

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explain social activities. The experimental method enables one to measure
key explanatory factors such as beliefs and social norms and to relate
these to observed behavior. This behavior is studied while controlling for
(i.e., holding constant), “institutions,” such as labor market rules. In addition, experiments allow for either control or measurement of micro-level
mechanisms. For example, one can measure subjects’ emotions directly
(physiologically or via a questionnaire) or induce power relations in the
experimental rules.
Depending on the degree to which a researcher exercises control over the
environment of interest, experiments can be categorized as (i) laboratory
experiments; (ii) “artefactual” and “framed” field experiments (Harrison &
List, 2004); and (iii) “natural” field experiments.1
In a laboratory experiment, human volunteers make decisions in a framework designed by the experimenter. Participants are given instructions
about available actions and how their decisions, possibly in interaction with
others’ decisions, determine their monetary payoffs. In most experiments
these payoffs are paid out. They are used to incentivize serious engagement
and to create real (as opposed to hypothetical) consequences of the actions
taken.2 Laboratory experiments are thought to score highly on internal
validity because of the highest possible experimental control they offer.
A disadvantage of laboratory experiments is a possibly limited external
validity due to an artificial, “unnatural” setting. Participants’ behavior may
not be representative for the population at large and the experimental task
may be abstract, relative to situations people face in daily life. The severity
of this limitation depends closely on the research question one is addressing (Schram, 2005). Field experiments offer an alternative with (in many
cases) higher external validity. Artefactual and framed field experiments
are methodologically closest to a laboratory experiment. An artefactual
field experiment is run in a laboratory, but with a non-standard subject
pool (e.g., firm managers). Framed field experiments involve running a
controlled experiment in the participants’ natural environment, for example,
on the premises of an organization (lab-in-the-field). However, the fact that
participants in framed field experiments typically know each other and
may share experiences and views that are unknown to the experimenter
reduces control and may therefore diminish internal validity compared to
the laboratory environment.
Natural field experiments are also conducted in the participant’s own
environment, but here a natural context is added. Instructions and tasks
are framed in a way that fits the organization to which the participants
1. For excellent methodological overviews, see Falk and Heckman (2009), and Jackson and Cox (2013).
2. Across the social sciences, there are differences in how instructions are applied and in the incentives
used. For a thorough discussion, see Hertwig and Ortmann (2001).

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belong (e.g., related to a workplace decision of hiring a candidate). Typically,
participants are unaware that they are participating in an experiment
(Przepiorka & Diekmann, 2013). For example, participants may be members
of an organization doing their usual tasks, while the circumstances have
been structured in a way determined by the experimenter. Making decisions
in a setting that is completely natural to participants yields high external
validity if the organization concerned is representative of a broader group of
environments. On the other hand, it further diminishes the control that the
experimenter has (e.g., participants might communicate), thus decreasing
internal validity.
In addressing a research question of interest, a combination of these
experimental methods would offer a spectrum ranging from the high
internal validity of controlled laboratory experiments (Walker & Willer,
2007) to the high external validity of natural field experiments (Harrison & List, 2004). Different results between the laboratory and field
settings would indicate that there is an interaction between, on the
one hand, the distinct contextual variables between the two settings,
and on the other hand, the relationship between the independent
and dependent variables under investigation. This could lead to
follow-up laboratory experiments, where such contextual variables are
systematically varied. For example, one could add the possibility of
participants knowing each other (as in the field) to the laboratory. Subsequently, the “updated” laboratory results can be used to modify the
theory.
STATE OF THE ART: TRUST AND SOCIAL NETWORKS IN THE
EMPLOYER–EMPLOYEE RELATIONSHIP
In spite of a noticeable increase in the use of experiments by social scientists, labor market behavior has not been extensively studied in experimental
research. The limited number of studies that have been done are primarily based on laboratory experiments, with participants typically being university students.3 Behavioral economists, in particular, have shown some
interest (see Falk & Fehr, 2003 for an overview). Most of this experimental
research studies the employment relationship between an employer and an
employee after the latter has been hired. As is stereotypical for economics,
an important focus is on labor market efficiency, monetary incentives, wage
formation, and economic surplus. Behavioral economists often look beyond
3. An often raised objection is that results identified in laboratory experiments with students may
not be relevant outside the laboratory because these participants are not familiar with the task and environment. To test the validity of this objection many studies have replicated laboratory experiments with
“professionals” in their natural environment. Camerer (2015) concludes that most of these replications
confirm the original laboratory results.

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this, however, and investigate market “irregularities”, the role of other forms
of social exchange, and underlying mechanisms such as reciprocity, fairness,
and inequity aversion.
The starting point in much of this literature is that employment relationships (i.e., contracts) are often necessarily incomplete, that is, they are
characterized by moral hazard (i.e., the hazard of opportunistic behavior when employees’ performance and skills are difficult to observe)
(Williamson, 1981). When this is the case, an important line of experimental
work initiated by Fehr, Kirchsteiger, and Riedl (1993) shows that elements of
trust and trustworthiness, fairness, and reciprocity have a strong influence
on the workings of the labor market. The relationship between an employer
and an employee is based on mutual trust and reciprocity: Employers give
a trusting signal by offering high wages and employees reciprocate by
exerting high effort. This “gift exchange” yields high efficiency, and as a
consequence it leads to ongoing long-term partnerships (Brown, Falk, &
Fehr, 2004). Such an outcome was already observed in an early and seminal
experimental study in sociology by Kollock (1994). Although not directly
related to the labor market, this study looks at the establishment of fixed
trading partnerships under conditions of uncertainty about the quality of the
good to be traded. Also, here the importance of trustworthiness in trading
relations is emphasized.4
Moral hazard issues play a role even before an employee has an employment relationship with the employer. In the hiring phase, employers can
try to minimize the uncertainties in their expected exchange with future
employees. A prime example is offered by the abundant sociological
research showing that social networks play a crucial role in hiring (Marsden
& Gorman, 2001). Mostly based on observational and survey data, the evidence shows that employers rely on the social networks of their incumbent
employees (Fernandez, Castilla, & Moore, 2000), as well as on employers’
own networks with family, friends, and professional contacts (Gërxhani &
Koster, 2015). Such networks serve to uncover information about potential
employees, especially for jobs with high moral hazard. Although very
valuable in providing detailed information on when and how employers
hire job candidates, this research has been challenged in terms of the effect of
social networks being causal or spurious (Mouw, 2003). It could be the case
that employers with certain characteristics are capable of both establishing
large social networks and hiring suitable employees. If so, one could not
conclude that having social networks causes “success” in hiring.
4. In general terms, Kollock’s study fits within the social exchange literature (Emerson, 1981), which
focuses on the effects of structures of exchange on behavioral and affective outcomes. Much of this literature assumes explicitly negotiated exchange structures/contracts, which renders trust among actors
unnecessary (Cook, Emerson, Gillmore, & Yamagishi, 1983). As argued above, however, employment relationships are often necessarily “unguaranteed” (i.e. moral hazard).

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Only very recently there has been an increase in the implementation of
causal research designs to study the dynamics between social networks and
employers’ hiring behavior.5 By combining a factorial survey (a.k.a. vignette)
with an experimental design on a sample of English employers, Di Stasio
and Gërxhani (2015) show that employers’ business and professional networks are particularly valuable to them as a way to compensate for poor
signaling by the education system. Kim and Fernandez (2017) also use a survey vignette experiment and examine whether the strength of social ties is a
causal driver of networks’ information benefits. Based on answers obtained
from MBA students in the United States, they find that “potential referrers are
more likely to relay job information to their friends than to acquaintances”
(p. 268).
Such studies have undoubtedly contributed to a better understanding of
the causal relationship between employers’ social networks and hiring outcomes. Although more research is needed, one can cautiously say that the
effect of social networks on hiring seems to be causal and not spurious. Nevertheless, it should be emphasized that although vignette (or audit and correspondence) studies are closer to the field than laboratory experiments are
(because they try to mimic an actual hiring scenario and typically address
actual employers) they do not create but simulate a hiring process. The conditions under which employers are asked to make hiring decisions are hypothetical and it remains an empirical question whether the same decisions
would be made in a scenario where the decisions have real consequences.
A few recent laboratory experimental studies on social networks and
hiring offer complementary insights not only regarding the causal effects
of networks but also into the underlying mechanisms of such effects, and
importantly on the emergence of employers’ social networks. Schram,
Brandts, and Gërxhani (2010) use a laboratory experiment where participants are incentivized to exchange a good (i.e., labor) in the role of a buyer
(i.e., employer) or a seller (i.e., employee). Employers can obtain information
from a (simulated) social network about an employee’s trustworthiness in
previous jobs. The authors then investigate how the possibility of receiving
this information affects employers’ decisions on which hiring channel to
employ: a centralized market institution (such as an employment agency)
or bilateral negotiations made possible via social network information.
Results show that contrary to the economic intuition that market institutions
always represent the efficient choice the information provided about a
candidate’s trustworthiness strongly affects the channels through which
5. There is rich literature in sociology that studies discrimination in hiring by using a type of “field
experiment”, known as audit and correspondence studies. For an overview of such designs, see Pager
(2007). Similar methods have also been applied to study employers’ consideration of candidates’ educational credentials (Jackson, 2009).

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employers recruit, allowing them to hire more trustworthy employees
and obtain higher efficiency via the social network. In a follow-up study,
Brandts, Gërxhani, Schram, and Ygosse-Battisti (2010) examine the role of
labor market size (in terms of the number of employers and employees) and
observe that increasing this size by a factor of three does not affect these
results.
In the previous two studies, information was exogenously provided to
all employers by the experimenter. A subsequent question of whether
employers are willing to share such beneficial information motivated
a new laboratory study (Gërxhani, Brandts, & Schram, 2013). Specifically, this addresses the question of “how and under what circumstances
social networks amongst employers emerge that facilitate the dissemination of information about a job candidate’s trustworthiness” (p. 541).
Employers are given the opportunity to share information about prospective employees before making a wage offer. The essay concludes that
mechanisms of conditional cooperation, reputation building, and direct
reciprocity lead to the emergence of information networks among employers (even when it is costly to share information), which in turn increases
employers’ use of networks as a hiring channel. Doing so also affects the
employer–employee exchange, as both parties benefit in terms of higher
wages and higher revenues. Application of the experimental method
enabled such detailed insights. By controlled variation of the variables
that might affect employers’ choice to resort to their social networks for
information, the researcher is able to relate observed use of this information to these variables, thus isolating the underlying motivations
for involving one’s network. Needless to say, this is not possible with
observational data.
A proper understanding of the hiring process requires studying both
the emergence of social networks where employers exchange information
and the effect of this information on the exchange between employers and
employees. The studies discussed above highlight the important role that
controlled experiments can play in this endeavor.
Finally, combining the laboratory results on labor market behavior in
the pre- and post-hiring phases provides a rich overview. Before hiring, in
order to decrease the uncertainty related to not knowing the trustworthiness
of a prospective employee, employers establish information networks to
obtain such information. They then use this information to reciprocate to
the employee’s past performance in previous jobs. Once a good match has
been made, the employer–employee relationship continues based on mutual
direct reciprocation where employees respond to high wages with high
performance and vice versa.

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MOVING FORWARD: ADVANCING THE MICROFOUNDATIONS
OF LABOR MARKET BEHAVIOR
More cutting-edge research on the microfoundations of labor market behavior is necessary. Experimentation in the laboratory or field is an emerging
trend and can potentially lead to a much needed expansion of our knowledge
on such microfoundations. But, this is just the beginning. Let me highlight
here a few promising lines of research that tackle methodological challenges
and offer opportunities for major new developments.
COMBINING EXPERIMENTAL METHODS
Combining different research methods allows the researcher to benefit
from their distinct advantages and compensate for the disadvantages.
For example, laboratory experiments can be combined with framed field
experiments, where the (same) design is implemented within organizations,
and natural field experiments, where members of an organization face
experimental treatment variation in their daily routines. Similarly, combining audit (correspondence) studies or survey vignettes with laboratory
experiments could also offer new and promising insights. There are very
few successful studies of such combinations. One is that of Correll, Benard,
and Paik (2007), who combine a laboratory experiment with an audit
study of actual employers to examine “motherhood” discrimination in
hiring.
Both examples show that a combination of (quasi)-experimental methods
allows for a better balance between the internal validity of a controlled environment and the external validity of a field setting. The external validity can
be further strengthened by repetition of the field experiments, either across
field settings (creating a cross section of controlled field observations) or over
time (creating a longitudinal dataset). Repetition over time is particularly
interesting because workplaces are characterized by dynamic processes of
ongoing interactions and power relations. As a consequence, labor market
rules, individual beliefs, and social norms may evolve in ways that limit the
external validity of any single snapshot of their interaction.
CROSS-COUNTRY EXPERIMENTAL COMPARISONS
Bills et al. (2017, p. 300) conclude that “A full specification of [ … ] contextual
conditions is still needed. In particular, more comparative research across
different institutional and organizational contexts, where the focus is not
only on formal institutions (i.e., rules and regulations) but also on informal
institutions (i.e., social norms) would help clarify how employers contribute
to the job match.” Typically, comparative studies are based on observational

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field data. Because many aspects differ between any two countries, it is often
difficult with such data to attribute a difference in the subject of interest
to any specific difference between the countries. Longitudinal field data
provide a step forward, but many differences persist over time (van der
Lippe, de Ruijter, de Ruijter, & Raub, 2011). Cross-country experimental
studies (Gërxhani & Schram, 2006; Heinrich et al., 2001) complement such
field studies. They use experimental control over the environment to correct
for between-country differences on external constraints, which allows the
researcher to isolate causal relations under truly ceteris paribus conditions
(Falk & Heckman, 2009). I know of no existing study that compares employer
hiring behavior in a controlled laboratory experiment implemented in multiple countries. Because the laboratory hiring regulations can be held constant
across countries, such a study would allow for an investigation of the role of
cross-country (e.g., cultural) differences that affect employers’ choices above
and beyond these institutional regulations.
INVESTIGATING ONLINE NETWORKS AND LABOR MARKETS
The ecology of organizational decision-making is changing, with social
media and online networking becoming increasingly influential in external
hiring. More research is needed in quantifying and understanding the role
of online networks such as LinkedIn or Facebook in employers’ hiring
decisions. Are the underlying mechanisms of their workings comparable to or different from the more traditional type of networks that have
dominated the literature? To a large extent, online networks resemble
features of the laboratory experiments described above. They provide
easily accessible platforms to share information about job candidates;
it is costly to provide such information as one needs to find it; and the
information can be provided discriminately. It would be an important
line of research to examine whether, when, and how information-sharing
networks emerge in such field environments and what their consequences are.
Moreover, the emergence of online labor markets such as Amazon Mechanical Turk (MTurk) and research tools such as Qualtrics has opened up new
opportunities to conduct controlled experiments on labor market behavior
with increased internal and external validity. Both offer access to a larger
and more diverse pool of potential participants. In addition, MTurk enables
the researcher to hire individuals outside the laboratory to do tasks designed
to collect data under controlled variation (see Rand, 2012 for an overview).
Studying hiring behavior with these new tools is another promising avenue
for future research, as existing experiments can be replicated and new
designs can be implemented.

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REACHING TOWARD BIOLOGICAL EXPLANATIONS
A final promising line of research is an exploration of the interaction between
social and biological processes in examining employers’ decision-making.
Recent works of Willer, Rogalin, Conlon, and Wojnowicz, (2013, p. 1016)
emphasize that “social factors shape biological processes in important
ways,” which in turn have a strong influence on behavior. For example,
employers’ interactions in a social network might affect their levels of
testosterone and cortisol. As a consequence, these hormones might affect
the extent to which an employer is willing to share information on a
candidate’s trustworthiness. In an ongoing research (De Dreu, Gërxhani, &
Schram, 2017), we observe that a variation of the social context in which an
individual performs a cognitive task yields differential biological responses
and that these responses affect performance on the task. In a similar vein, a
better grip on the biological underpinnings of the role of social networks in
employers’ behavior could provide important steps ahead in understanding
this behavior.
CONCLUSION
Experiments provide a useful method for understanding many phenomena
of interest in the social sciences. It is important to realize that experiments
are complementary to other tools available to the researcher. A tool might
present itself as particularly useful for some research questions while it provides little additional knowledge for others. And, sometimes, the best way
to move forward is to use a combination of methods.
At the same time, some phenomena are notoriously more difficult than
others to study. I have argued that employers’ hiring behavior is a prime
example. The main message of this essay is that the use of diverse experimental methods to address this is an emerging trend that takes us closer to
an understanding of employer behavior by establishing causal relationships
and specifying their underlying mechanisms. Moreover, recent technological developments, such as online labor markets, introduce new platforms
where laboratory control can be exerted in environments that closely mirror
the environment social scientists are interested in.
Another important contribution of experimentation is that it sheds light on
the mechanisms generating labor market inequality. Existing experimental
studies on employers’ hiring indicate that their reliance on social networks
can lead to social inequality on both the demand and supply sides. Because
access to social networks is not equally distributed across employers, they
have differential access to information, which leads to unequal chances in
finding trustworthy employees. At the supply side, the more employers hire

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through their social networks, the more inequality there will be in who gets
the jobs.
Although much can be studied using experiments, conventions about what
can or cannot be done should be continuously challenged. For this, an interdisciplinary exchange of knowledge is essential. As shown in this essay, the
existing knowledge on experimental labor market behavior benefits from
interdisciplinary research bridging economics and sociology. There is a pressing need to maintain this trend by strengthening this bridge.
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approach. American Journal of Sociology, 87(3), 548–577.

KLARITA GËRXHANI SHORT BIOGRAPHY
Klarita Gërxhani is Professor of Economic Sociology at the European University Institute in Florence, Italy. She received her PhD in Economics at the Tinbergen Institute and the Faculty of Economics and Business at the University
of Amsterdam. Her main expertise lies in the microfoundations of economic
sociology. She has published on a variety of topics, including employers’ hiring behavior, social norms, social status and gender (in)equalities, social capital, informal economies, and tax evasion. Her research is best characterized
as interdisciplinary. It combines laboratory and field experiments with field
surveys and economic sociological theory. She is the author of various articles
published in internationally peer-reviewed journals, including the Annual
Review of Sociology, Social Networks, PloS ONE, European Sociological Review,
European Economic Review, Social Science Research, Journal of Economic Psychology, European Journal of Political Economy, and Journal of Economic Behavior &
Organization. She has received two major research grants from the Netherlands’ Organization for Scientific Research (NWO).
RELATED ESSAYS
Returns to Education in Different Labor Market Contexts (Sociology), Klaus
Schöemann and Rolf Becker
Rent, Rent-Seeking, and Social Inequality (Sociology), Beth Red Bird and
David B. Grusky
To Flop Is Human: Inventing Better Scientific Approaches to Anticipating
Failure (Methods), Robert Boruch and Alan Ruby
Misinformation and How to Correct It (Psychology), John Cook et al.
The Reorganization of Work (Sociology), Charles Heckscher
Network Research Experiments (Methods), Allen L. Linton and Betsy Sinclair
Transformation of the Employment Relationship (Sociology), Arne L.
Kalleberg and Peter V. Marsden
Implicit Attitude Measures (Psychology), Gregory Mitchell and Philip E.
Tetlock
Knowledge Transfer (Psychology), Timothy J. Nokes-Malach and J. Elizabeth
Richey
Quasi-Experiments (Methods), Charles S. Reichardt

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

The Rise of Experimentation in Political Science (Political Science), Ronald
Rogowski
Virtual Worlds as Laboratories (Methods), Travis L. Ross et al.
How Do Labor Market Networks Work? (Sociology), Brian Rubineau and
Roberto M. Fernandez
Impact of Limited Education on Employment Prospects in Advanced
Economies (Sociology), Heike Solga
How Brief Social-Psychological Interventions Can Cause Enduring Effects
(Sociology), Dushiyanthini (Toni) Kenthirarajah and Gregory M. Walton
Gender and Work (Sociology), Christine L. Williams and Megan Tobias Neely



The Experimental Approach to
Studying Employers’ Hiring Behavior
KLARITA GËRXHANI

Abstract
This essay advocates the use of experimental methods to study labor demand. Experimentation contributes to a better understanding of employers’ hiring behavior by
establishing what is cause and what is effect in observed behavior and allows for
a better grip on the mechanisms underlying the hiring process. Given the difficulties in obtaining information from employers, experiments offer a fruitful alternative
route to collecting information about the hiring process. The limited existing research
provides a basis for new and promising steps into the future. To address research
questions related to employers’ hiring behavior, I propose combining experimental methods; implementing cross-country experimental designs; conducting experiments on online labor markets; and using experimental control to explore the interaction between social context and biological factors. Setting these steps will give
employers’ decisions the attention they deserve when it comes to the important role
that hiring plays in generating labor market (in)equalities.

INTRODUCTION
A typical employment relationship consists of an exchange of labor for
money. The process of establishing such a relationship thus involves both
an employee seeking to offer his or her labor and an employer offering
a position. The first aspect, job seeking, has received abundant scholarly
attention (Granovetter, 1974). Although the latter aspect is a necessary
condition for a job match to take place—without an available job, a
job search cannot succeed—employers’ hiring behavior and strategies
remained under-researched for many decades. Fortunately, this has started
to change.
Bills, Di Stasio, and Gërxhani (2017) provide a recent and extensive
overview of the literature focusing on the demand side of the hiring
process. Studies have by and large been based on observational field
and survey data, but recently a few studies have started to appear that
Emerging Trends in the Social and Behavioral Sciences.
Robert Scott and Marlis Buchmann (General Editors) with Stephen Kosslyn (Consulting Editor).
© 2017 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

use (quasi)experimental data. While observational and survey data can
provide rich detail on how employers perceive the information they receive
about potential employees, such data cannot address issues of endogeneity
and self-selection bias, and cannot establish what is cause and what is
effect (Mouw, 2003). Moreover, observing employers’ behavior is quite
difficult in and of itself. Lack of data has been an important hurdle to
studying employers’ hiring behavior in much of social science research.
Compared to employees, employers are more resistant to information
sharing because of time constraints, reluctance to public exposure, or lack
of obvious benefits from collaboration. Although progress has been made,
more effort and creativity are needed to open the black box of employers’
decision-making.
This essay advocates the use of experimental methods to better understand
employers’ behavior. Over the past 20 years, there has been a noticeable
increase in the use of experiments by social scientists to study a rich platter
of phenomena (Jackson & Cox, 2013). The method’s main strength is the
control it provides. Causal knowledge requires controlled variation and
the laboratory allows for tight control over the environment in which
an interaction takes place (Falk & Heckman, 2009). “The experimental
method is extremely powerful, particularly in largely eliminating the
contaminating role of unobserved confounders and thereby making causal
explanation more secure . . . .” (Jackson & Cox, 2013, p. 43). Moreover, the
experimental method allows one to isolate the mechanisms underlying
employers’ hiring behavior, which is hard to achieve based on observational data. Finally, depending on the type of experiment conducted—see
below—experimentation provides a relatively low-cost tool (compared to
observational studies) to better understand employers’ hiring behavior. As
Bills et al. (2017) argue, this understanding is important because employers
play a major role in determining opportunities and (in)equalities in the labor
market.
THE EXPERIMENTAL METHOD
A major goal of empirical research is to find relations between variables.
This is often done using naturally occurring data, survey data, or in-depth
interviews. With such data, the challenge is to establish whether a relation
between variables is causal or merely a correlation. One can attempt to
address the causality issue by applying proper statistical or econometric
techniques. Alternatively, one can generate new data with experimental
control in a laboratory or in the field. The experimental method in the social
sciences collects data on social phenomena in a controlled—laboratory or
field—environment. Like theory and empirics, experiments are used to

The Experimental Approach to Studying Employers’ Hiring Behavior

3

explain social activities. The experimental method enables one to measure
key explanatory factors such as beliefs and social norms and to relate
these to observed behavior. This behavior is studied while controlling for
(i.e., holding constant), “institutions,” such as labor market rules. In addition, experiments allow for either control or measurement of micro-level
mechanisms. For example, one can measure subjects’ emotions directly
(physiologically or via a questionnaire) or induce power relations in the
experimental rules.
Depending on the degree to which a researcher exercises control over the
environment of interest, experiments can be categorized as (i) laboratory
experiments; (ii) “artefactual” and “framed” field experiments (Harrison &
List, 2004); and (iii) “natural” field experiments.1
In a laboratory experiment, human volunteers make decisions in a framework designed by the experimenter. Participants are given instructions
about available actions and how their decisions, possibly in interaction with
others’ decisions, determine their monetary payoffs. In most experiments
these payoffs are paid out. They are used to incentivize serious engagement
and to create real (as opposed to hypothetical) consequences of the actions
taken.2 Laboratory experiments are thought to score highly on internal
validity because of the highest possible experimental control they offer.
A disadvantage of laboratory experiments is a possibly limited external
validity due to an artificial, “unnatural” setting. Participants’ behavior may
not be representative for the population at large and the experimental task
may be abstract, relative to situations people face in daily life. The severity
of this limitation depends closely on the research question one is addressing (Schram, 2005). Field experiments offer an alternative with (in many
cases) higher external validity. Artefactual and framed field experiments
are methodologically closest to a laboratory experiment. An artefactual
field experiment is run in a laboratory, but with a non-standard subject
pool (e.g., firm managers). Framed field experiments involve running a
controlled experiment in the participants’ natural environment, for example,
on the premises of an organization (lab-in-the-field). However, the fact that
participants in framed field experiments typically know each other and
may share experiences and views that are unknown to the experimenter
reduces control and may therefore diminish internal validity compared to
the laboratory environment.
Natural field experiments are also conducted in the participant’s own
environment, but here a natural context is added. Instructions and tasks
are framed in a way that fits the organization to which the participants
1. For excellent methodological overviews, see Falk and Heckman (2009), and Jackson and Cox (2013).
2. Across the social sciences, there are differences in how instructions are applied and in the incentives
used. For a thorough discussion, see Hertwig and Ortmann (2001).

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

belong (e.g., related to a workplace decision of hiring a candidate). Typically,
participants are unaware that they are participating in an experiment
(Przepiorka & Diekmann, 2013). For example, participants may be members
of an organization doing their usual tasks, while the circumstances have
been structured in a way determined by the experimenter. Making decisions
in a setting that is completely natural to participants yields high external
validity if the organization concerned is representative of a broader group of
environments. On the other hand, it further diminishes the control that the
experimenter has (e.g., participants might communicate), thus decreasing
internal validity.
In addressing a research question of interest, a combination of these
experimental methods would offer a spectrum ranging from the high
internal validity of controlled laboratory experiments (Walker & Willer,
2007) to the high external validity of natural field experiments (Harrison & List, 2004). Different results between the laboratory and field
settings would indicate that there is an interaction between, on the
one hand, the distinct contextual variables between the two settings,
and on the other hand, the relationship between the independent
and dependent variables under investigation. This could lead to
follow-up laboratory experiments, where such contextual variables are
systematically varied. For example, one could add the possibility of
participants knowing each other (as in the field) to the laboratory. Subsequently, the “updated” laboratory results can be used to modify the
theory.
STATE OF THE ART: TRUST AND SOCIAL NETWORKS IN THE
EMPLOYER–EMPLOYEE RELATIONSHIP
In spite of a noticeable increase in the use of experiments by social scientists, labor market behavior has not been extensively studied in experimental
research. The limited number of studies that have been done are primarily based on laboratory experiments, with participants typically being university students.3 Behavioral economists, in particular, have shown some
interest (see Falk & Fehr, 2003 for an overview). Most of this experimental
research studies the employment relationship between an employer and an
employee after the latter has been hired. As is stereotypical for economics,
an important focus is on labor market efficiency, monetary incentives, wage
formation, and economic surplus. Behavioral economists often look beyond
3. An often raised objection is that results identified in laboratory experiments with students may
not be relevant outside the laboratory because these participants are not familiar with the task and environment. To test the validity of this objection many studies have replicated laboratory experiments with
“professionals” in their natural environment. Camerer (2015) concludes that most of these replications
confirm the original laboratory results.

The Experimental Approach to Studying Employers’ Hiring Behavior

5

this, however, and investigate market “irregularities”, the role of other forms
of social exchange, and underlying mechanisms such as reciprocity, fairness,
and inequity aversion.
The starting point in much of this literature is that employment relationships (i.e., contracts) are often necessarily incomplete, that is, they are
characterized by moral hazard (i.e., the hazard of opportunistic behavior when employees’ performance and skills are difficult to observe)
(Williamson, 1981). When this is the case, an important line of experimental
work initiated by Fehr, Kirchsteiger, and Riedl (1993) shows that elements of
trust and trustworthiness, fairness, and reciprocity have a strong influence
on the workings of the labor market. The relationship between an employer
and an employee is based on mutual trust and reciprocity: Employers give
a trusting signal by offering high wages and employees reciprocate by
exerting high effort. This “gift exchange” yields high efficiency, and as a
consequence it leads to ongoing long-term partnerships (Brown, Falk, &
Fehr, 2004). Such an outcome was already observed in an early and seminal
experimental study in sociology by Kollock (1994). Although not directly
related to the labor market, this study looks at the establishment of fixed
trading partnerships under conditions of uncertainty about the quality of the
good to be traded. Also, here the importance of trustworthiness in trading
relations is emphasized.4
Moral hazard issues play a role even before an employee has an employment relationship with the employer. In the hiring phase, employers can
try to minimize the uncertainties in their expected exchange with future
employees. A prime example is offered by the abundant sociological
research showing that social networks play a crucial role in hiring (Marsden
& Gorman, 2001). Mostly based on observational and survey data, the evidence shows that employers rely on the social networks of their incumbent
employees (Fernandez, Castilla, & Moore, 2000), as well as on employers’
own networks with family, friends, and professional contacts (Gërxhani &
Koster, 2015). Such networks serve to uncover information about potential
employees, especially for jobs with high moral hazard. Although very
valuable in providing detailed information on when and how employers
hire job candidates, this research has been challenged in terms of the effect of
social networks being causal or spurious (Mouw, 2003). It could be the case
that employers with certain characteristics are capable of both establishing
large social networks and hiring suitable employees. If so, one could not
conclude that having social networks causes “success” in hiring.
4. In general terms, Kollock’s study fits within the social exchange literature (Emerson, 1981), which
focuses on the effects of structures of exchange on behavioral and affective outcomes. Much of this literature assumes explicitly negotiated exchange structures/contracts, which renders trust among actors
unnecessary (Cook, Emerson, Gillmore, & Yamagishi, 1983). As argued above, however, employment relationships are often necessarily “unguaranteed” (i.e. moral hazard).

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

Only very recently there has been an increase in the implementation of
causal research designs to study the dynamics between social networks and
employers’ hiring behavior.5 By combining a factorial survey (a.k.a. vignette)
with an experimental design on a sample of English employers, Di Stasio
and Gërxhani (2015) show that employers’ business and professional networks are particularly valuable to them as a way to compensate for poor
signaling by the education system. Kim and Fernandez (2017) also use a survey vignette experiment and examine whether the strength of social ties is a
causal driver of networks’ information benefits. Based on answers obtained
from MBA students in the United States, they find that “potential referrers are
more likely to relay job information to their friends than to acquaintances”
(p. 268).
Such studies have undoubtedly contributed to a better understanding of
the causal relationship between employers’ social networks and hiring outcomes. Although more research is needed, one can cautiously say that the
effect of social networks on hiring seems to be causal and not spurious. Nevertheless, it should be emphasized that although vignette (or audit and correspondence) studies are closer to the field than laboratory experiments are
(because they try to mimic an actual hiring scenario and typically address
actual employers) they do not create but simulate a hiring process. The conditions under which employers are asked to make hiring decisions are hypothetical and it remains an empirical question whether the same decisions
would be made in a scenario where the decisions have real consequences.
A few recent laboratory experimental studies on social networks and
hiring offer complementary insights not only regarding the causal effects
of networks but also into the underlying mechanisms of such effects, and
importantly on the emergence of employers’ social networks. Schram,
Brandts, and Gërxhani (2010) use a laboratory experiment where participants are incentivized to exchange a good (i.e., labor) in the role of a buyer
(i.e., employer) or a seller (i.e., employee). Employers can obtain information
from a (simulated) social network about an employee’s trustworthiness in
previous jobs. The authors then investigate how the possibility of receiving
this information affects employers’ decisions on which hiring channel to
employ: a centralized market institution (such as an employment agency)
or bilateral negotiations made possible via social network information.
Results show that contrary to the economic intuition that market institutions
always represent the efficient choice the information provided about a
candidate’s trustworthiness strongly affects the channels through which
5. There is rich literature in sociology that studies discrimination in hiring by using a type of “field
experiment”, known as audit and correspondence studies. For an overview of such designs, see Pager
(2007). Similar methods have also been applied to study employers’ consideration of candidates’ educational credentials (Jackson, 2009).

The Experimental Approach to Studying Employers’ Hiring Behavior

7

employers recruit, allowing them to hire more trustworthy employees
and obtain higher efficiency via the social network. In a follow-up study,
Brandts, Gërxhani, Schram, and Ygosse-Battisti (2010) examine the role of
labor market size (in terms of the number of employers and employees) and
observe that increasing this size by a factor of three does not affect these
results.
In the previous two studies, information was exogenously provided to
all employers by the experimenter. A subsequent question of whether
employers are willing to share such beneficial information motivated
a new laboratory study (Gërxhani, Brandts, & Schram, 2013). Specifically, this addresses the question of “how and under what circumstances
social networks amongst employers emerge that facilitate the dissemination of information about a job candidate’s trustworthiness” (p. 541).
Employers are given the opportunity to share information about prospective employees before making a wage offer. The essay concludes that
mechanisms of conditional cooperation, reputation building, and direct
reciprocity lead to the emergence of information networks among employers (even when it is costly to share information), which in turn increases
employers’ use of networks as a hiring channel. Doing so also affects the
employer–employee exchange, as both parties benefit in terms of higher
wages and higher revenues. Application of the experimental method
enabled such detailed insights. By controlled variation of the variables
that might affect employers’ choice to resort to their social networks for
information, the researcher is able to relate observed use of this information to these variables, thus isolating the underlying motivations
for involving one’s network. Needless to say, this is not possible with
observational data.
A proper understanding of the hiring process requires studying both
the emergence of social networks where employers exchange information
and the effect of this information on the exchange between employers and
employees. The studies discussed above highlight the important role that
controlled experiments can play in this endeavor.
Finally, combining the laboratory results on labor market behavior in
the pre- and post-hiring phases provides a rich overview. Before hiring, in
order to decrease the uncertainty related to not knowing the trustworthiness
of a prospective employee, employers establish information networks to
obtain such information. They then use this information to reciprocate to
the employee’s past performance in previous jobs. Once a good match has
been made, the employer–employee relationship continues based on mutual
direct reciprocation where employees respond to high wages with high
performance and vice versa.

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

MOVING FORWARD: ADVANCING THE MICROFOUNDATIONS
OF LABOR MARKET BEHAVIOR
More cutting-edge research on the microfoundations of labor market behavior is necessary. Experimentation in the laboratory or field is an emerging
trend and can potentially lead to a much needed expansion of our knowledge
on such microfoundations. But, this is just the beginning. Let me highlight
here a few promising lines of research that tackle methodological challenges
and offer opportunities for major new developments.
COMBINING EXPERIMENTAL METHODS
Combining different research methods allows the researcher to benefit
from their distinct advantages and compensate for the disadvantages.
For example, laboratory experiments can be combined with framed field
experiments, where the (same) design is implemented within organizations,
and natural field experiments, where members of an organization face
experimental treatment variation in their daily routines. Similarly, combining audit (correspondence) studies or survey vignettes with laboratory
experiments could also offer new and promising insights. There are very
few successful studies of such combinations. One is that of Correll, Benard,
and Paik (2007), who combine a laboratory experiment with an audit
study of actual employers to examine “motherhood” discrimination in
hiring.
Both examples show that a combination of (quasi)-experimental methods
allows for a better balance between the internal validity of a controlled environment and the external validity of a field setting. The external validity can
be further strengthened by repetition of the field experiments, either across
field settings (creating a cross section of controlled field observations) or over
time (creating a longitudinal dataset). Repetition over time is particularly
interesting because workplaces are characterized by dynamic processes of
ongoing interactions and power relations. As a consequence, labor market
rules, individual beliefs, and social norms may evolve in ways that limit the
external validity of any single snapshot of their interaction.
CROSS-COUNTRY EXPERIMENTAL COMPARISONS
Bills et al. (2017, p. 300) conclude that “A full specification of [ … ] contextual
conditions is still needed. In particular, more comparative research across
different institutional and organizational contexts, where the focus is not
only on formal institutions (i.e., rules and regulations) but also on informal
institutions (i.e., social norms) would help clarify how employers contribute
to the job match.” Typically, comparative studies are based on observational

The Experimental Approach to Studying Employers’ Hiring Behavior

9

field data. Because many aspects differ between any two countries, it is often
difficult with such data to attribute a difference in the subject of interest
to any specific difference between the countries. Longitudinal field data
provide a step forward, but many differences persist over time (van der
Lippe, de Ruijter, de Ruijter, & Raub, 2011). Cross-country experimental
studies (Gërxhani & Schram, 2006; Heinrich et al., 2001) complement such
field studies. They use experimental control over the environment to correct
for between-country differences on external constraints, which allows the
researcher to isolate causal relations under truly ceteris paribus conditions
(Falk & Heckman, 2009). I know of no existing study that compares employer
hiring behavior in a controlled laboratory experiment implemented in multiple countries. Because the laboratory hiring regulations can be held constant
across countries, such a study would allow for an investigation of the role of
cross-country (e.g., cultural) differences that affect employers’ choices above
and beyond these institutional regulations.
INVESTIGATING ONLINE NETWORKS AND LABOR MARKETS
The ecology of organizational decision-making is changing, with social
media and online networking becoming increasingly influential in external
hiring. More research is needed in quantifying and understanding the role
of online networks such as LinkedIn or Facebook in employers’ hiring
decisions. Are the underlying mechanisms of their workings comparable to or different from the more traditional type of networks that have
dominated the literature? To a large extent, online networks resemble
features of the laboratory experiments described above. They provide
easily accessible platforms to share information about job candidates;
it is costly to provide such information as one needs to find it; and the
information can be provided discriminately. It would be an important
line of research to examine whether, when, and how information-sharing
networks emerge in such field environments and what their consequences are.
Moreover, the emergence of online labor markets such as Amazon Mechanical Turk (MTurk) and research tools such as Qualtrics has opened up new
opportunities to conduct controlled experiments on labor market behavior
with increased internal and external validity. Both offer access to a larger
and more diverse pool of potential participants. In addition, MTurk enables
the researcher to hire individuals outside the laboratory to do tasks designed
to collect data under controlled variation (see Rand, 2012 for an overview).
Studying hiring behavior with these new tools is another promising avenue
for future research, as existing experiments can be replicated and new
designs can be implemented.

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

REACHING TOWARD BIOLOGICAL EXPLANATIONS
A final promising line of research is an exploration of the interaction between
social and biological processes in examining employers’ decision-making.
Recent works of Willer, Rogalin, Conlon, and Wojnowicz, (2013, p. 1016)
emphasize that “social factors shape biological processes in important
ways,” which in turn have a strong influence on behavior. For example,
employers’ interactions in a social network might affect their levels of
testosterone and cortisol. As a consequence, these hormones might affect
the extent to which an employer is willing to share information on a
candidate’s trustworthiness. In an ongoing research (De Dreu, Gërxhani, &
Schram, 2017), we observe that a variation of the social context in which an
individual performs a cognitive task yields differential biological responses
and that these responses affect performance on the task. In a similar vein, a
better grip on the biological underpinnings of the role of social networks in
employers’ behavior could provide important steps ahead in understanding
this behavior.
CONCLUSION
Experiments provide a useful method for understanding many phenomena
of interest in the social sciences. It is important to realize that experiments
are complementary to other tools available to the researcher. A tool might
present itself as particularly useful for some research questions while it provides little additional knowledge for others. And, sometimes, the best way
to move forward is to use a combination of methods.
At the same time, some phenomena are notoriously more difficult than
others to study. I have argued that employers’ hiring behavior is a prime
example. The main message of this essay is that the use of diverse experimental methods to address this is an emerging trend that takes us closer to
an understanding of employer behavior by establishing causal relationships
and specifying their underlying mechanisms. Moreover, recent technological developments, such as online labor markets, introduce new platforms
where laboratory control can be exerted in environments that closely mirror
the environment social scientists are interested in.
Another important contribution of experimentation is that it sheds light on
the mechanisms generating labor market inequality. Existing experimental
studies on employers’ hiring indicate that their reliance on social networks
can lead to social inequality on both the demand and supply sides. Because
access to social networks is not equally distributed across employers, they
have differential access to information, which leads to unequal chances in
finding trustworthy employees. At the supply side, the more employers hire

The Experimental Approach to Studying Employers’ Hiring Behavior

11

through their social networks, the more inequality there will be in who gets
the jobs.
Although much can be studied using experiments, conventions about what
can or cannot be done should be continuously challenged. For this, an interdisciplinary exchange of knowledge is essential. As shown in this essay, the
existing knowledge on experimental labor market behavior benefits from
interdisciplinary research bridging economics and sociology. There is a pressing need to maintain this trend by strengthening this bridge.
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KLARITA GËRXHANI SHORT BIOGRAPHY
Klarita Gërxhani is Professor of Economic Sociology at the European University Institute in Florence, Italy. She received her PhD in Economics at the Tinbergen Institute and the Faculty of Economics and Business at the University
of Amsterdam. Her main expertise lies in the microfoundations of economic
sociology. She has published on a variety of topics, including employers’ hiring behavior, social norms, social status and gender (in)equalities, social capital, informal economies, and tax evasion. Her research is best characterized
as interdisciplinary. It combines laboratory and field experiments with field
surveys and economic sociological theory. She is the author of various articles
published in internationally peer-reviewed journals, including the Annual
Review of Sociology, Social Networks, PloS ONE, European Sociological Review,
European Economic Review, Social Science Research, Journal of Economic Psychology, European Journal of Political Economy, and Journal of Economic Behavior &
Organization. She has received two major research grants from the Netherlands’ Organization for Scientific Research (NWO).
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