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Do workers really benefit from their social networks?

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  • François Fontaine

Abstract

This paper provides a simple matching model in which unemployed workers and employers can be matched together through social networks or through more ?formal? methods of search. We show that, in some case, networks substitute for labor market and that this crowding-out effect may be socially costly. For that reason, a policy increasing the social capital of the disadvantaged workers can increase the unemployment rate and decrease workers? output. JEL Classification: E24, J64, J68, Z13.

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Bibliographic Info

Article provided by De Boeck Université in its journal Recherches économiques de Louvain.

Volume (Year): 74 (2008)
Issue (Month): 1 ()
Pages: 5-31

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Handle: RePEc:cai:reldbu:rel_741_0005

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Web page: http://www.cairn.info/revue-recherches-economiques-de-louvain.htm

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Keywords: economic policy; matching; social networks; unemployment;

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References

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  1. Samuel Bentolila & Claudio Michelacci & Javier Suarez, 2010. "Social Contacts and Occupational Choice," Economica, London School of Economics and Political Science, vol. 77(305), pages 20-45, 01.
  2. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "Job reallocation, employment fluctuations and unemployment," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 18, pages 1171-1228 Elsevier.
  3. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, 03.
  4. Adriana Kugler, 2002. "Employee referrals and efficiency wages," Economics Working Papers 647, Department of Economics and Business, Universitat Pompeu Fabra.
  5. Antoni Calvó-Armengol & Matthew O. Jackson, 2004. "The Effects of Social Networks on Employment and Inequality," American Economic Review, American Economic Association, vol. 94(3), pages 426-454, June.
  6. Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
  7. Calvó-Armengol, Antoni & Zenou, Yves, 2001. "Job Matching, Social Network and Word-of-Mouth Communication," Seminar Papers 695, Stockholm University, Institute for International Economic Studies.
  8. Samuel Bentolila & Andrea Ichino, 2000. "Unemployment and Consumption: Are Job Losses Less Painful near the Mediterranean?," CESifo Working Paper Series 372, CESifo Group Munich.
  9. Addison, John T. & Portugal, Pedro, 2001. "Job Search Methods and Outcomes," IZA Discussion Papers 349, Institute for the Study of Labor (IZA).
  10. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 375-410, July.
  11. David Margolis & Véronique Simonnet, 2002. "Educational Track, Networks and Labor Market Outcomes," Working Papers 2002-60, Centre de Recherche en Economie et Statistique.
  12. Cahuc, Pierre & Fontaine, François, 2002. "On the Efficiency of Job Search with Social Networks," CEPR Discussion Papers 3511, C.E.P.R. Discussion Papers.
  13. Holzer, Harry J, 1988. "Search Method Use by Unemployed Youth," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 1-20, January.
  14. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  15. James Albrecht & Pieter Gautier & Susan Vroman, 2003. "Equilibrium Directed Search with Multiple Applications," Tinbergen Institute Discussion Papers 03-004/3, Tinbergen Institute, revised 14 Feb 2004.
  16. Martin Brown & Armin Falk & Ernst Fehr, 2004. "Relational Contracts and the Nature of Market Interactions," Econometrica, Econometric Society, vol. 72(3), pages 747-780, 05.
  17. Marmaros, David & Sacerdote, Bruce, 2002. "Peer and social networks in job search," European Economic Review, Elsevier, vol. 46(4-5), pages 870-879, May.
  18. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Organizational Design and Technology Choice under Intrafirm Bargaining," American Economic Review, American Economic Association, vol. 86(1), pages 195-222, March.
  19. Gregg, Paul & Wadsworth, Jonathan, 1996. "How Effective Are State Employment Agencies? Jobcentre Use and Job Matching in Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 443-67, August.
  20. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  21. 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 306-30, July.
  22. Harry J. Holzer, 1987. "Hiring Procedures in the Firm: Their Economic Determinants and Outcomes," NBER Working Papers 2185, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Zaharieva, Anna, 2013. "Double Matching: Social Contacts in a Labour Market with On-the-Job Search," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79891, Verein für Socialpolitik / German Economic Association.
  2. Fontaine, Francois, 2005. "Why Are Similar Workers Paid Differently? The Role of Social Networks," IZA Discussion Papers 1786, Institute for the Study of Labor (IZA).
  3. Zaharieva, Anna, 2013. "Social welfare and wage inequality in search equilibrium with personal contacts," Labour Economics, Elsevier, vol. 23(C), pages 107-121.
  4. Marco J. van der Leij & I. Sebastian Buhai, 2008. "A Social Network Analysis of Occupational Segregation," Working Papers 2008.31, Fondazione Eni Enrico Mattei.
  5. Walter Trockel, 2012. "Robustness of Intermediate Agreements for the Discrete Raiffa Solution," Working Papers 472, Bielefeld University, Center for Mathematical Economics.
  6. Sabatini, Fabio, 2005. "Social capital, labour precariousness and the economic performance. An empirical assessment of the strength of weak ties in Italy," AICCON Working Papers 26-2005, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.

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