The causal effect of informal job search on wage and job satisfaction: evidence from Egypt and Jordan using random forest method

Purpose - This study aims to examine the impact of finding a job through family and friend contacts on employees' wages and job satisfaction. Design/methodology/approach - This study uses machine learning techniques in economics to estimate the causal effect of being hired through informal contacts on wages and job satisfaction using cross-sectional data from the Higher Education Graduates Survey 2012 (HEGS, 2012) in Egypt and Jordan. Findings - The author's results confirm that negative and positive consequences are likely to occur. In Egypt, a wage penalty of 28% is estimated in the starting wage, but the impact diminishes in the last wage. By contrast, in Jordan, no penalty is captured in the starting wage, but a premium of 10% is estimated in the last wage. Job satisfaction is negatively affected by the penalty in the starting wage. Social implications - Job market search methods that allow for professional job referrals, facilitate more efficient information transfer between job-seekers and employers and provide opportunities for job-seekers with weak social capital should be implemented to lower dependence on informal search methods. Originality/value - The research provides comprehensive evidence about finding a job through informal contact with employees' well-being. The consequences of finding a job using family and friends' contacts, whether positive or negative, cannot be ignored. Future research could benefit from the findings of this study. Peer review - The peer review history for this article is available at:https://publons.com/publon/10.1108/IJSE-05-2022-0318.