In this study, we use unique data from a field experiment in the Swedish labor market to investigate how past and contemporary unemployment affect a young worker’s probability of being invited to a job interview. In contrast to studies using administrative/survey data, we have complete control over the information available to the employers and there is no scope for unobserved heterogeneity. We find no evidence that recruiting employers use information about past unemployment to sort workers. This suggests that the scarring effects of unemployment may not be as severe as has been indicated by previous studies. Overall, our results suggest that recruiting employers, when confronted with a pile of job applications, follow a strategy of picking applicants with positive characteristics (‘diamonds’) rather than eliminating applicants with negative characteristics (‘lemons’). |