IDEAS home Printed from https://ideas.repec.org/a/eee/labeco/v89y2024ics0927537124000691.html
   My bibliography  Save this article

Do employers learn more from referrals than from other recruitment channels?

Author

Listed:
  • Gürtzgen, Nicole
  • Pohlan, Laura

Abstract

We study whether referrals deliver better information about the productivity of new hires than other recruiting channels. Using combined vacancy-register data, we document that referrals are associated with less screening and lower search costs. We demonstrate that the referral wage premium is informative on referrals’ information advantage only if differences in screening are accounted for. Consistent with the predictions from a learning model, referrals increase new hires’ job stability and wages, with the effects diminishing over time. Results suggest that the referral information advantage is particularly pronounced for males and when employers use referrals as the only search channel.

Suggested Citation

  • Gürtzgen, Nicole & Pohlan, Laura, 2024. "Do employers learn more from referrals than from other recruitment channels?," Labour Economics, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:labeco:v:89:y:2024:i:c:s0927537124000691
    DOI: 10.1016/j.labeco.2024.102574
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927537124000691
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.labeco.2024.102574?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jovanovic, Boyan, 1984. "Matching, Turnover, and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 108-122, February.
    2. Christian Dustmann & Albrecht Glitz & Uta Schönberg & Herbert Brücker, 2016. "Referral-based Job Search Networks," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(2), pages 514-546.
    3. Lochner Benjamin, 2024. "IABSE-ADIAB – IAB Job Vacancy Survey Data Linked to Administrative Data," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 244(1-2), pages 159-165, February.
    4. Lori Beaman & Jeremy Magruder, 2012. "Who Gets the Job Referral? Evidence from a Social Networks Experiment," American Economic Review, American Economic Association, vol. 102(7), pages 3574-3593, December.
    5. Manolis Galenianos, 2013. "Learning About Match Quality and the Use of Referrals," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 668-690, October.
    6. Martin Huber, 2014. "Identifying Causal Mechanisms (Primarily) Based On Inverse Probability Weighting," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 29(6), pages 920-943, September.
    7. Kugler, Adriana D., 2003. "Employee referrals and efficiency wages," Labour Economics, Elsevier, vol. 10(5), pages 531-556, October.
    8. DeVaro, Jed, 2008. "The labor market effects of employer recruitment choice," European Economic Review, Elsevier, vol. 52(2), pages 283-314, February.
    9. Weinstein, Russell, 2018. "Employer screening costs, recruiting strategies, and labor market outcomes: An equilibrium analysis of on-campus recruiting," Labour Economics, Elsevier, vol. 55(C), pages 282-299.
    10. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    11. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    12. repec:iab:iabfme:201906(en is not listed on IDEAS
    13. Lochner, Benjamin, 2019. "A simple algorithm to link "last hires" from the Job Vacancy Survey to administrative records," FDZ Methodenreport 201906_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    14. Gürtzgen, Nicole & Lochner, Benjamin & Pohlan, Laura & van den Berg, Gerard J., 2021. "Does online search improve the match quality of new hires?," Labour Economics, Elsevier, vol. 70(C).
    15. Amanda Pallais & Emily Glassberg Sands, 2016. "Why the Referential Treatment? Evidence from Field Experiments on Referrals," Journal of Political Economy, University of Chicago Press, vol. 124(6), pages 1793-1828.
    16. Martina Rebien & Michael Stops & Anna Zaharieva, 2020. "Formal Search And Referrals From A Firm'S Perspective," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(4), pages 1679-1748, November.
    17. Lee, Sokbae & Wilke, Ralf A., 2009. "Reform of Unemployment Compensation in Germany: A Nonparametric Bounds Analysis Using Register Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(2), pages 193-205.
    18. Rachel Heath, 2018. "Why Do Firms Hire Using Referrals? Evidence from Bangladeshi Garment Factories," Journal of Political Economy, University of Chicago Press, vol. 126(4), pages 1691-1746.
    19. James Heckman & Rodrigo Pinto & Peter Savelyev, 2013. "Understanding the Mechanisms through Which an Influential Early Childhood Program Boosted Adult Outcomes," American Economic Review, American Economic Association, vol. 103(6), pages 2052-2086, October.
    20. Stephen V. Burks & Bo Cowgill & Mitchell Hoffman & Michael Housman, 2015. "The Value of Hiring through Employee Referrals," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(2), pages 805-839.
    21. Achyuta Adhvaryu & James Fenske & Anant Nyshadham, 2019. "Early Life Circumstance and Adult Mental Health," Journal of Political Economy, University of Chicago Press, vol. 127(4), pages 1516-1549.
    22. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    23. Benjamin Lester & David A. Rivers & Giorgio Topa, 2021. "The Heterogeneous Impact of Referrals on Labor Market Outcomes," Staff Reports 987, Federal Reserve Bank of New York.
    24. Abbring, J. H. & van Ours, J. C., 1994. "Sequential or non-sequential employers' search?," Economics Letters, Elsevier, vol. 44(3), pages 323-328.
    25. Mario Bossler & Nicole Gürtzgen & Alexander Kubis & Benjamin Küfner & Benjamin Lochner, 2020. "The IAB Job Vacancy Survey: design and research potential," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 54(1), pages 1-12, December.
    26. Wooldridge, Jeffrey M., 2007. "Inverse probability weighted estimation for general missing data problems," Journal of Econometrics, Elsevier, vol. 141(2), pages 1281-1301, December.
    27. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    28. Nicole Guertzgen & Andreas Moczall, 2020. "Sequential versus non-sequential search among German employers – evidence from a job vacancy survey," Applied Economics Letters, Taylor & Francis Journals, vol. 27(11), pages 873-879, June.
    29. Simon, Curtis J & Warner, John T, 1992. "Matchmaker, Matchmaker: The Effect of Old Boy Networks on Job Match Quality, Earnings, and Tenure," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 306-330, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Benjamin Lester & David A. Rivers & Giorgio Topa, 2021. "The Heterogeneous Impact of Referrals on Labor Market Outcomes," Staff Reports 987, Federal Reserve Bank of New York.
    2. Moon, Ji-Woong, 2023. "Strategic referrals and on-the-job search equilibrium," Journal of Monetary Economics, Elsevier, vol. 134(C), pages 135-151.
    3. Martin Chegere & Paolo Falco & Andreas Menzel, 2023. "Social Ties at Work and Effort Choice: Experimental Evidence from Tanzania," CERGE-EI Working Papers wp763, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    4. Meta Brown & Elizabeth Setren & Giorgio Topa, 2016. "Do Informal Referrals Lead to Better Matches? Evidence from a Firm's Employee Referral System," Journal of Labor Economics, University of Chicago Press, vol. 34(1), pages 161-209.
    5. Nicoletta Berardi & Marie Lalanne & Paul Seabright, 2019. "Professional Networks and their Coevolution with Executive Careers," Working papers 723, Banque de France.
    6. Levati, Lorenzo Maria & Lalanne, Marie, 2020. "The impact of job referrals on employment outcomes in top corporate positions," SAFE Working Paper Series 268, Leibniz Institute for Financial Research SAFE.
    7. Emre Ekinci, 2022. "Monetary rewards in employee referral programs," Manchester School, University of Manchester, vol. 90(1), pages 35-58, January.
    8. Guido Friebel & Matthias Heinz & Mitchell Hoffman & Nick Zubanov, 2023. "What Do Employee Referral Programs Do? Measuring the Direct and Overall Effects of a Management Practice," Journal of Political Economy, University of Chicago Press, vol. 131(3), pages 633-686.
    9. Christian Dustmann & Albrecht Glitz & Uta Schönberg & Herbert Brücker, 2016. "Referral-based Job Search Networks," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(2), pages 514-546.
    10. Marie Lalanne, 2021. "Social Networks and Job Referrals in Recruitment," Carlo Alberto Notebooks 652, Collegio Carlo Alberto.
    11. Eliason, Marcus & Hensvik, Lena & Kramarz, Francis & Skans, Oskar Nordström, 2023. "Social connections and the sorting of workers to firms," Journal of Econometrics, Elsevier, vol. 233(2), pages 468-506.
    12. Afridi, Farzana & Dhillon, Amrita, 2022. "Social Networks and the Labour Market," IZA Discussion Papers 15774, Institute of Labor Economics (IZA).
    13. Berardi, Nicoletta & Lalanne, Marie & Seabright, Paul, 2018. "Professional networks and their coevolution with executive careers: Evidence from North America and Europe," SAFE Working Paper Series 243, Leibniz Institute for Financial Research SAFE.
    14. Dhillon, Amrita & Peeters, Ronald & Bartrum, Oliver & Yüksel, Ayşe Müge, 2020. "Hiring an employee’s friends is good for business: Overcoming moral hazard with social networks," Labour Economics, Elsevier, vol. 67(C).
    15. Jose Garcia‐Louzao & Marta Silva, 2024. "Coworker networks and the labor market outcomes of displaced workers: Evidence from Portugal," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 63(3), pages 389-413, July.
    16. Oyer, Paul & Schaefer, Scott, 2011. "Personnel Economics: Hiring and Incentives," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 20, pages 1769-1823, Elsevier.
    17. Martina Rebien & Michael Stops & Anna Zaharieva, 2020. "Formal Search And Referrals From A Firm'S Perspective," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(4), pages 1679-1748, November.
    18. Lena Hensvik & Oskar Nordström Skans, 2016. "Social Networks, Employee Selection, and Labor Market Outcomes," Journal of Labor Economics, University of Chicago Press, vol. 34(4), pages 825-867.
    19. Dariel, Aurelie & Riedl, Arno & Siegenthaler, Simon, 2021. "Referral hiring and wage formation in a market with adverse selection," Games and Economic Behavior, Elsevier, vol. 130(C), pages 109-130.
    20. Osman, Adam & Speer, Jamin D. & Weaver, Andrew, 2022. "Connections, Referrals, and Hiring Outcomes: Evidence from an Egyptian Establishment Survey," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 342-355.

    More about this item

    Keywords

    Matching; Referral based hiring; Information frictions; Recruiting channels;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:labeco:v:89:y:2024:i:c:s0927537124000691. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/labeco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.