NBER

Matthias Heinz

University of Cologne
Department of Economics
Albertus-Magnus-Platz
50923 Köln
Germany

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Cologne

NBER Working Papers and Publications

June 2019What Do Employee Referral Programs Do? A Firm-level Randomized Controlled Trial
with Guido Friebel, Mitchell Hoffman, Nick Zubanov: w25920
Employee referral programs (ERPs) are randomly introduced in a grocery chain. Larger referral bonuses increase referrals and decrease referral quality, though the increase in referrals from having an ERP is modest. However, the overall effect of having an ERP is substantial, reducing attrition by roughly 15% and decreasing firm labor costs by up to almost 3%. This occurs, partly, because referrals stay longer than nonreferrals, but, mainly, because all workers stay longer in treated than control stores, even among stores where no referrals are made. The most-supported mechanism for these indirect effects is that workers value being involved in hiring.

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