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Social networks and unraveling in labor markets

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  • Fainmesser, Itay P.

Abstract

This paper studies the phenomenon of early hiring in entry-level labor markets affected by social networks. We offer a model in which information is revealed over time. At first, workers have noisy information about their own ability. The early information is ‘soft’ and non-verifiable, and workers can convey the information credibly only to firms that are connected to them. Later on, ‘hard’ accurate verifiable information becomes available. We characterize the effects of changes to the network structure on the unraveling of the market towards early hiring. Moreover, we show that an efficient design of the matching procedure can prevent unraveling.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 148 (2013)
Issue (Month): 1 ()
Pages: 64-103

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Handle: RePEc:eee:jetheo:v:148:y:2013:i:1:p:64-103

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Networks; Unraveling; Entry-level labor markets; Early hiring;

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References

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  1. M.Utku Unver, 2004. "Unraveling Yields Inefficient Matching: Evidence from Post-Season College Football Bowls," Working Papers 259, University of Pittsburgh, Department of Economics, revised Jan 2004.
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  6. Posner, Richard A. & Avery, Christopher & Jolls, Christine & Roth, Alvin, 2001. "The Market for Federal Judicial Law Clerks," Scholarly Articles 2623748, Harvard University Department of Economics.
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  9. Itay P. Fainmesser & David A. Goldberg, 2011. "Bilateral and Community Enforcement in a Networked Market with Simple Strategies," Working Papers 2011-2, Brown University, Department of Economics.
  10. Niederle, Muriel & Roth, Alvin E., 2009. "Market Culture: How Rules Governing Exploding Offers Affect Market Performance," Scholarly Articles 11077571, Harvard University Department of Economics.
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Citations

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Cited by:
  1. Alvin E. Roth, 2010. "Marketplace Institutions Related to the Timing of Transactions," NBER Working Papers 16556, National Bureau of Economic Research, Inc.
  2. Muriel Niederle & Alvin E. Roth & M. Utku Ünver, 2013. "Unraveling Results from Comparable Demand and Supply: An Experimental Investigation," Games, MDPI, Open Access Journal, vol. 4(2), pages 243-282, June.
  3. Itay P. Fainmesser & David A. Goldberg, 2011. "Bilateral and Community Enforcement in a Networked Market with Simple Strategies," Working Papers 2011-2, Brown University, Department of Economics.
  4. Itay Fainmesser, 2010. "Community Structure and Market Outcomes: A Repeated Games in Networks Approach," Working Papers 2010-14, Brown University, Department of Economics.

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