The emergence of employer information networks in an experimental labor market

• We experimentally study the emergence of employer information networks.
• In these networks employer can exchange information about prospective workers’ trustworthiness.
• We observe ‘anonymity networks’ where information is provided as a collective good.
• We also observe ‘reciprocity networks’ where information sharing is reciprocal.
• Recruitment through these networks benefits both employers and workers.

We use laboratory experiments to investigate whether employer networks emerge that facilitate information sharing about the trustworthiness of job candidates. The design allows us to distinguish between mechanisms underlying the relations among employers and those between employers and workers. One type of network we observe is an ‘anonymity network’ where information is anonymously and voluntarily provided as a collective good for all employers to use. The other type is a ‘reciprocity network’ where information sharing is driven by the rewarding of previously given information by the requestor. Recruitment through these networks leads to higher earnings for both employers and workers.