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Why are similar workers paid differently? the role of social networks

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  • Fontaine, François

Abstract

We provide a matching model where identical workers are embedded in ex ante identical social networks. Job arrival rate is endogenous and wages are bargained. We study the evolution of networks over time and characterize the equilibrium distribution of unemployment rates across networks. Within our framework wage dispersion arises endogenously as the consequence of the dynamics of networks, firms' strategies and wage bargaining. We show that networks induce new search externalities which shape the dynamics of the labor market. Our endogenous framework allows us to quantify these effects.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 32 (2008)
Issue (Month): 12 (December)
Pages: 3960-3977

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Handle: RePEc:eee:dyncon:v:32:y:2008:i:12:p:3960-3977

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Keywords: Social networks Job search Matching Wage dispersion;

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