We conduct a field experiment in partnership with the largest job platform in Brazil to study how environmental, social, and governance (ESG) practices of firms affect talent allocation. We find both an average job-seeker’s preference for ESG and a large degree of heterogeneity across socioeconomic groups, with the strongest preference displayed by highly educated, white, and politically liberal individuals. We combine our experimental estimates with administrative matched employer-employee microdata and estimate an equilibrium model of the labor market. Counterfactual analyses suggest ESG practices increase total economic output and worker welfare, while increasing the wage gap between skilled and unskilled workers.

Using resume data on over 20 million U.S. workers, we find that the flow of employees between a pair of firms sharply drops by about 20% when the firms start to share a director on their boards. We find no trend prior to initiation, and the reduced flow persists throughout the overlapping period. This relationship is stronger in settings where firms are more likely to benefit from lower competition for each other’s employees and is most pronounced for higher-skilled employees. The results suggest that shared directors facilitate cooperative behavior in the labor market.

We document that finance employees involuntarily separated for misconduct earn 2.8% to 8.6% higher income than similar employees laid-off for no fault. Our results are most consistent with assortative matching in the finance labor market --- firms more likely to engage in misconduct are also more likely to hire employees separated for misconduct and pay a wage premium for them. Finance is unique in that these patterns are reversed for all other sectors. One hypothesis explaining our findings is that most products and services in finance are based on future cash flows which makes it potentially easier to camouflage such behavior.