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Quantifying the effects of job matching through social networks

Author

Listed:
  • Adalbert Mayer

    (Washington College)

Abstract

The recent literature explains the theoretical implications of the matching of workers to jobs through social networks. These insights are obtained for extremely simplified economies or rely on unrealistically simple social networks. Therefore, it is difficult to obtain a sense for the quantitative importance of effects generated by real life social networks. In this paper, I augment a labor market matching model to allow for information transmission through social networks. I illustrate the effects of social networks and I use simulations to quantify the predictions of the model for complex and realistic social networks. Information transmission through social contacts reduces the steady state unemployment rate from a hypothetical 6.5% to 5%. Social referrals can explain 1/5th of the observed duration dependence of unemployment. They cannot explain much of the variation in wages of otherwise homogeneous workers and do not substantially influence aggregate outcomes over the business cycle.

Suggested Citation

  • Adalbert Mayer, 2011. "Quantifying the effects of job matching through social networks," Journal of Applied Economics, Universidad del CEMA, vol. 14, pages 35-59, May.
    • Handle: RePEc:cem:jaecon:v:14:y:2011:n:1:p:35-59
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    File URL: https://ucema.edu.ar/publicaciones/download/volume14/mayer.pdf
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    Citations

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    Cited by:

    1. Yoske Igarashi, 2016. "Distributional effects of hiring through networks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 90-110, April.
    2. Yoske Igarashi, 2013. "Distributional effects of hiring through networks," Discussion Papers 1309, University of Exeter, Department of Economics.
    3. Matt Marx & Bram Timmermans, 2017. "Hiring Molecules, Not Atoms: Comobility and Wages," Organization Science, INFORMS, vol. 28(6), pages 1115-1133, December.

    More about this item

    Keywords

    job search; matching; social networks; information transmission;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • 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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