We study a recent recruitment drive for public sector positions in Mexico. Different salaries were announced randomly across recruitment sites, and job offers were subsequently randomized. Screening relied on exams designed to measure applicants’ intellectual ability, personality, and motivation. This allows the first experimental estimates of (1) the role of financial incentives in attracting a larger and more qualified pool of applicants, (2) the elasticity of the labor supply facing the employer, and (3) the role of job attributes (distance, attractiveness of the municipal environment) in helping fill vacancies, as well as the role of wages in helping fill positions in less attractive municipalities. A theoretical model of job applications and acceptance guides the empirical inquiry. We find that higher wages attract more able applicants as measured by their IQ, personality, and proclivity toward public sector work—that is, we find no evidence of adverse selection effects on motivation; higher wage offers also increased acceptance rates, implying a labor supply elasticity of around 2 and some degree of monopsony power. Distance and worse municipal characteristics strongly decrease acceptance rates, but higher wages help bridge the recruitment gap in worse municipalities.

We use the fall of the Berlin Wall in 1989 to show that personal relationships which individuals maintain for noneconomic reasons can be an important determinant of regional economic growth. We show that West German households who had social ties to East Germany in 1989 experienced a persistent rise in their personal incomes after the fall of the Berlin Wall. Moreover, the presence of these households significantly affects economic performance at the regional level: it increases the returns to entrepreneurial activity, the share of households who become entrepreneurs, and the likelihood that firms based within a given West German region invest in East Germany. As a result, West German regions that (for idiosyncratic reasons) have a high concentration of households with social ties to the East exhibit substantially higher growth in income per capita in the early 1990s. A one standard deviation rise in the share of households with social ties to East Germany in 1989 is associated with a 4.7 percentage point rise in income per capita over six years. We interpret our findings as evidence of a causal link between social ties and regional economic development.

Accommodating couples has been a long-standing issue in the design of centralized labor market clearinghouses for doctors and psychologists, because couples view pairs of jobs as complements. A stable matching may not exist when couples are present. This article’s main result is that a stable matching exists when there are relatively few couples and preference lists are sufficiently short relative to market size. We also discuss incentives in markets with couples. We relate these theoretical results to the job market for psychologists, in which stable matchings exist for all years of the data, despite the presence of couples.