Designing the market for job vacancies: a trust experiment with employment centers staff

We use a trust experiment to study the behavior of 500 employment agents who serve as matchmakers between labor supply and demand. These agents often face difficult trade-offs when they do not find a suitable match within their employment center: they can either place a suboptimal job seeker, let a vacancy go unfilled, or collaborate with other competing employment centers by sharing vacancies and job seekers at the risk of losing business to their competitors. We show in our experiment that lack of trust and norm misperceptions impede such collaboration. In addition, we observe that financial incentives increase collaboration but also employer poaching, and that social incentives in the form of a reputation mechanism decrease poaching. Finally, we find that the agents’ level of norm misperceptions and their willingness to cooperate influence the effectiveness of these incentives. We discuss policy implications and suggest research avenues to study the overlooked role of intermediaries in market design, and in particular in the market of agencies offering employment services.