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Social Networks and Unraveling in Labor Markets

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Abstract

This paper studies the phenomenon of early hiring in entry-level labor markets (e.g. the market for gastroenterology fellowships and the market for judicial clerks) in the presence of social networks. We o¤er a two-stage model in which workers in training institutions reveal information on their own ability over time. In the early stage, workers receive a noisy signal about their own ability. The early information is ?soft?and non-veri?able, and workers can convey the information credibly only to ? rms that are connected to them (potentially via their mentors). At the second stage, ? hard? veri?able (and accurate) information is revealed to the workers and can be credibly transmitted to all ?rms. We characterize the e¤ects of changes to the network structure on the unraveling of the market towards early hiring. Moreover, we show that an e¢ cient design of the matching procedure can prevent unraveling.

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Bibliographic Info

Paper provided by Brown University, Department of Economics in its series Working Papers with number 2010-15.

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Date of creation: 2010
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Handle: RePEc:bro:econwp:2010-15

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Postal: Department of Economics, Brown University, Providence, RI 02912

Related research

Keywords: Networks; market design; unraveling; entry-level labor markets; early hiring;

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References

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Cited by:
  1. 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.
  2. 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.
  3. Alvin E. Roth, 2010. "Marketplace Institutions Related to the Timing of Transactions," NBER Working Papers 16556, National Bureau of Economic Research, Inc.
  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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