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Social networks, job search methods and reservation wages: evidence for Germany

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Author Info

  • Marco Caliendo
  • Ricarda Schmidl
  • Arne Uhlendorff

Abstract

Purpose – This paper aims to analyze the role of social networks on the job search choices of the unemployed. If social networks convey useful information in the job search process, individuals with larger networks should experience a higher productivity of informal search channels. This in turn affects the choice of formal search intensity and the reservation wage. The paper seeks to test these search-theoretic implications of productive social networks empirically. Design/methodology/approach – The authors use the IZA Evaluation Dataset containing detailed information on job search behavior of recently unemployed individuals. Observing a rich array of personality traits and direct measures of the social network, the authors choose an identification approach based on observable characteristics using least squares and binary probit regression analysis. Findings – The findings confirm theoretical expectations. Individuals with larger networks use informal search channels more often and shift from formal to informal search. In addition to that, evidence is found for a positive relationship between network size and reservation wages. Research limitations/implications – The extent to which networks are used during job search most likely also depends on the quality of the network, which cannot be observed in the data. However, as the network significantly changes the observable formal job search effort of individuals, public job search monitoring policies should take these effects into account. Originality/value – The paper complements the previous body of literature on the role of social networks in the labor market that predominantly focuses on labor market outcomes. By highlighting the interaction between networks and job search choices the paper improves the understanding of realized labor market outcomes in the presence of networks.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal International Journal of Manpower.

Volume (Year): 32 (2011)
Issue (Month): 7 (November)
Pages: 796-824

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Handle: RePEc:eme:ijmpps:v:32:y:2011:i:7:p:796-824

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Related research

Keywords: Germany; Job search behaviour; Jobs; Social networks; Unemployment;

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References

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  1. Yannis M. Ioannides & Linda Datcher Loury, 2002. "Job Information Networks, Neighborhood Effects and Inequality," Discussion Papers Series, Department of Economics, Tufts University 0217, Department of Economics, Tufts University.
  2. Groves, Melissa Osborne, 2005. "How important is your personality? Labor market returns to personality for women in the US and UK," Journal of Economic Psychology, Elsevier, vol. 26(6), pages 827-841, December.
  3. repec:ese:iserwp:2010-14 is not listed on IDEAS
  4. Luca P. Merlino & Andrea Galeotti, 2010. "Endogenous Job Contact Networks," 2010 Meeting Papers 853, Society for Economic Dynamics.
  5. Andrea Weber & Helmut Mahringer, 2008. "Choice and success of job search methods," Empirical Economics, Springer, vol. 35(1), pages 153-178, August.
  6. Gerard J. van den Berg & Bas van der Klaauw, 2006. "Counseling And Monitoring Of Unemployed Workers: Theory And Evidence From A Controlled Social Experiment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 895-936, 08.
  7. Antoni Calvó-Armengol & Matthew O. Jackson, 2003. "Networks in Labor Markets: Wage and Employment Dynamics and Inequality," Working Papers 55, Barcelona Graduate School of Economics.
  8. Patrick Bayer & Stephen L. Ross, 2004. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," Econometric Society 2004 North American Summer Meetings 495, Econometric Society.
  9. Lex Borghans & Angela Lee Duckworth & James J. Heckman & Bas ter Weel, 2008. "The Economics and Psychology of Personality Traits," Working Papers 200827, Geary Institute, University College Dublin.
  10. Wahba, Jackline & Zenou, Yves, 2003. "Density, Social Networks and Job Search Methods: Theory and Application to Egypt," CEPR Discussion Papers 3967, C.E.P.R. Discussion Papers.
  11. Michele Pellizzari, 2004. "Do friends and relatives really help in getting a good job?," LSE Research Online Documents on Economics 19980, London School of Economics and Political Science, LSE Library.
  12. Mortensen, Dale T. & Vishwanath, Tara, 1994. "Personal contacts and earnings : It is who you know!," Labour Economics, Elsevier, vol. 1(2), pages 187-201, March.
  13. repec:ese:iserwp:2011-21 is not listed on IDEAS
  14. Bramoullé, Yann & Saint-Paul, Gilles, 2004. "Social Networks and Labor Market Transitions," IZA Discussion Papers 1215, Institute for the Study of Labor (IZA).
  15. Koning, Pierre & Berg, Gerard J. van den & Ridder, Geert, 1997. "A structural analysis of job search methods and subsequent wages," Serie Research Memoranda 0036, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  16. Marco Caliendo & Deborah Cobb-Clark & Arne Uhlendorff, 2010. "Locus of Control and Job Search Strategies," Discussion Papers of DIW Berlin 979, DIW Berlin, German Institute for Economic Research.
  17. Lawrence M. Kahn & Stuart A. Low, 1988. "Systematic and Random Search A Synthesis," Journal of Human Resources, University of Wisconsin Press, vol. 23(1), pages 1-20.
  18. Harry J. Holzer, 1986. "Search Method Use by Unemployed Youth," NBER Working Papers 1859, National Bureau of Economic Research, Inc.
  19. Blau, David M & Robins, Philip K, 1990. "Job Search Outcomes for the Employed and Unemployed," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 637-55, June.
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Citations

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Cited by:
  1. Bachmann, Ronald & Baumgarten, Daniel, 2012. "How Do the Unemployed Search for a Job? Evidence from the EU Labour Force Survey," IZA Discussion Papers 6753, Institute for the Study of Labor (IZA).
  2. Albrecht Glitz, 2013. "Coworker Networks in the Labour Market," CESifo Working Paper Series 4250, CESifo Group Munich.
  3. Amelie F. Constant & Annabelle Krause & Ulf Rinne & Klaus F. Zimmermann, 2011. "Economic preferences and attitudes of the unemployed: Are natives and second generation migrants alike?," International Journal of Manpower, Emerald Group Publishing, vol. 32(7), pages 825-851, November.
  4. Amelie Constant & Martin Kahanec & Ulf Rinne & Klaus F. Zimmermann, 2009. "Ethnicity, Job Search and Labor Market Reintegration of the Unemployed," Discussion Papers of DIW Berlin 963, DIW Berlin, German Institute for Economic Research.
  5. Caliendo, Marco & Uhlendorff, Arne, 2010. "Determinanten des Suchverhaltens von Arbeitslosen: Ausgewählte Erkenntnisse basierend auf dem IZA Evaluationsdatensatz," IZA Discussion Papers 5379, Institute for the Study of Labor (IZA).
  6. Krause, Annabelle, 2012. "Don't Worry, Be Happy? Happiness and Reemployment," IZA Discussion Papers 7107, Institute for the Study of Labor (IZA).

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