The Labor Market Signaling Value of Promotions

Abstract

Do firms learn from other firms' human resource allocation decisions? This paper studies this question in the context of worker promotions, which according to theory serve as informative signals to external employers under asymmetric learning about employee ability. Using variation in the timing of promotion reports on LinkedIn CVs, we implement a differences-in-differences strategy to demonstrate that online promotion reports increase recruiter-initiated worker contacts ("InMails''). The signaling impact of promotions is concentrated among those who have recently attracted previous recruiter interest, consistent with a higher expected value of firm information acquisition among such workers.