The Value of Reference Letters: Experimental Evidence from South Africa

Abstract

We show that reference letters from former employers alleviate information frictions in a low-skill labor market, improving applicant screening and gender equity. A resume audit study finds that using a reference letter in the application increases callbacks by 60 percent. Women drive the effect. Letters are effective because they provide valuable information about workers’ skills that employers use to select applicants of higher ability. A second experiment, which encourages job seekers to obtain and use a reference letter, finds consistent results. In particular, reference letters raise job interviews and employment for women. (JEL D83, J16, J24, J64, O12)