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Labor Market and Search through Personal Contacts

Author

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  • Chuhay Roman

    (Economics Department, Higher School of Economics, Moscow, Russian Federation)

Abstract

In this article, we consider the impact of personal contacts on the labor market outcome. Unlike previous studies, we do not assume any particular network structure or vacancies communication protocol. Instead, we state three general properties of matching functions that allow us to establish the existence and uniqueness of equilibrium and characterize the impact of social ties on the labor market. In particular, we show that a monotonically increasing matching function in socialization level is a necessary and sufficient condition for having monotonically decreasing unemployment and increasing wage and market tightness. However, the same does not apply to vacancy rate. We establish a condition under which a monotonically increasing matching function produces a vacancy rate that first increases in socialization level, but then decreases.

Suggested Citation

  • Chuhay Roman, 2013. "Labor Market and Search through Personal Contacts," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 191-213, June.
    • Handle: RePEc:bpj:bejtec:v:13:y:2013:i:1:p:23:n:5
    DOI: 10.1515/bejte-2012-0021
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    References listed on IDEAS

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    1. Calvo-Armengol, Antoni & Zenou, Yves, 2005. "Job matching, social network and word-of-mouth communication," Journal of Urban Economics, Elsevier, vol. 57(3), pages 500-522, May.
    2. Fontaine, François, 2008. "Why are similar workers paid differently? the role of social networks," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 3960-3977, December.
    3. Andrea Galeotti & Luca Paolo Merlino, 2014. "Endogenous Job Contact Networks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(4), pages 1201-1226, November.
    4. Yannis M. Ioannides & Adriaan R. Soetevent, 2006. "Wages and Employment in a Random Social Network with Arbitrary Degree Distribution," American Economic Review, American Economic Association, vol. 96(2), pages 270-274, May.
    5. Cabrales, Antonio & Calvó-Armengol, Antoni & Zenou, Yves, 2007. "Effort and synergies in network formation," UC3M Working papers. Economics we072515, Universidad Carlos III de Madrid. Departamento de Economía.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    labor market; unemployment; matching; search; social network; referrals;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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