Were You Referred By a Man or a Woman? Gender of Contracts and Labor Market Outcomes

There is a substantial body of research in economics and sociology suggesting that personal contacts are widely used as a method to find jobs. This study investigates how a worker's labor market outcomes are related to the gender of the person who refers the worker to his or her job. Data from the National Longitudinal Survey of Youth show that information networks are highly segregated by sex. A significant majority of the men who use contacts use male contacts, and significant majority of the women who use contacts use female contacts. In addition, it is found that both men and women who use male contacts have significantly higher wages than those who do not use contacts, and men who use female contacts have significantly lower wages than those who do not use contacts. It is possible that individuals who use female contacts possess other unobservable characteristics that make them less likely to succeed and individuals who use male contacts possess other unobservable characteristics that make them more likely to succeed. This concern is addressed with two econometric models that control for possible endogeneity. First, an instrumental variables technique is used. The presence of siblings and working siblings are used as instruments. Next, a three equation maximum likelihood method that explicitly models the correlation between the errors in the contact and wage equations is used. Corrected results from both methods are consistent with the ordinary least squares results.