On the Efficiency of Job Search with Social Networks
AbstractThis Paper provides a simple matching model in which unemployed workers and employers can be matched together through social networks and through more efficient, but also more costly, methods. In this framework, decentralized decisions to utilize social networks in the job search process can be inefficient and give rise to multiple equilibria for some parameters' values. More precisely, in a decentralized equilibrium, social networks can be over-utilized with respect to an efficient allocation in some circumstances, and under-utilized in others. Moreover, the existence of different job search methods can give rise to a higher job search intensity than the efficient one. This is in sharp contrast with the standard result, derived in matching models, according to which search intensity is always too low if not efficient. Eventually, in the presence of different job search methods, conditional unemployment benefit hikes can improve welfare when individuals are risk neutral.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3511.
Date of creation: Aug 2002
Date of revision:
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Other versions of this item:
- Pierre Cahuc & Fran�Ois Fontaine, 2009. "On the Efficiency of Job Search with Social Networks," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(3), pages 411-439, 06.
- Cahuc, Pierre & Fontaine, Francois, 2002. "On the Efficiency of Job Search with Social Networks," IZA Discussion Papers 583, Institute for the Study of Labor (IZA).
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-02-18 (All new papers)
- NEP-DGE-2003-02-18 (Dynamic General Equilibrium)
- NEP-NET-2003-02-18 (Network Economics)
- NEP-URE-2003-02-18 (Urban & Real Estate Economics)
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