Information Frictions and Skill Signaling in the Youth Labor Market

This paper provides evidence that information frictions limit the labor market trajectories of US youth. We provide credible skill signals-recommendation letters based on supervisor feedback-to a random subset of 43,409 participants in New York's summer jobs program. Letters increase employment the following year by 3 percentage points (4.5 percent). Earnings effects grow over four years to a cumulative $1,349 (4.9 percent). We find little evidence of increased job search or confidence; instead, signals may help employers better identify successful matches with high-productivity workers. Pulling youth into the labor market can, however, hamper on-time graduation, especially among low-achieving students.