Labor market signals: The role of Large Language Models
Abbas Nejad,Kian Musillo,Giuseppe Wicker,Till Zaccaria,Niccolò
Abbas Nejad,Kian
Musillo,Giuseppe
Wicker,Till
Zaccaria,Niccolò
Abstract
Large Language Models (LLMs) are transforming the labor market, including hiring decisions. This paper examines their impact on the signals job-seekers send to potential employers through two field experiments focusing on cover letters. We find that LLMs enhance signal quality, especially benefiting lower-quality applicants, yet these gains do not boost interview invitations because they are concentrated in standardized, less influential sections of the cover letter. When recruiters learn of LLM usage, they place greater value on high-quality, human-crafted letters. Hence, LLMs reduce the informativeness of signals, potentially increasing inefficiencies in labor market matching as estimated by a calibrated structural model.
Description
Date
2026-02
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Volume Title
Publisher
Research Projects
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Keywords
Large Language Models, cover letters, labor market, matching, signaling, C93 - Field Experiments, J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity, O33 - Technological Change: Choices and Consequences ; Diffusion Processes, M51 - Firm Employment Decisions ; Promotions, SDG 4 - Quality Education, SDG 8 - Decent Work and Economic Growth
Citation
Abbas Nejad, K, Musillo, G, Wicker, T & Zaccaria, N 2026, 'Labor market signals: The role of Large Language Models', Journal of Labor Economics. https://doi.org/10.2139/ssrn.5185035