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When Strong Ties are Strong: Networks and Youth Labor Market Entry

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  • Kramarz, Francis
  • Nordström Skans, Oskar

Abstract

The conditions under which young workers find their first real post-graduation jobs are both very important for the young’ future careers and insufficiently documented given their potential importance for young workers welfare. To study these conditions, and in particular the role played by social ties, we use a Swedish population-wide linked employer-employee data set of graduates from all levels of schooling which includes detailed information on family ties, neighborhoods, schools, class composition, and parents’ and children’ employers over a period covering years with both high and low unemployment, together with measures of firm performance. We find that strong social ties (parents) are an important determinant for where young workers find their first job. The effects are larger if the graduate’s position is “weak” (low education, bad grades), during high unemployment years, and when information on potential openings are likely to be scarce. On the hiring side, by contrast, the effects are larger if the parent’s position is “strong” (long tenure, high wage) and if the parent’s plant is more productive. The youths appear to benefit from the use of strong social ties through faster access to jobs and by better labor market outcomes as measured a few years after entry. In particular, workers finding their entry jobs through strong social ties are considerably more likely to remain in this job, while experiencing better wage growth than other entrants in the same plant. Firms also appear to benefit from these wage costs (relative to comparable entrants) starting at a lower base. They also benefit on the parents’ side; parents’ wage growth drops dramatically exactly at the entry of one of their children in the plant, although this is a moment when firm profits tend to be growing. Indeed, the firm-side benefits appear large enough for (at least small) firms to increase job creation at the entry level in years when a child of one of their employees graduates.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9620.

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Date of creation: Sep 2013
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Handle: RePEc:cpr:ceprdp:9620

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Keywords: network; strong tie; youth employment;

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References

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  1. Federico Cingano & Alfonso Rosolia, 2012. "People I Know: Job Search and Social Networks," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 291 - 332.
  2. Olof Aslund & Oskar Nordström Skans, 2010. "Will I See You at Work? Ethnic Workplace Segregation in Sweden, 1985-2002," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 63(3), pages 471-493, April.
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  5. Maitreesh Ghatak & Timothy W. Guinnane, 1998. "The Economics of Lending with Joint Liability: Theory and Practice," Discussion Papers 98-16, University of Copenhagen. Department of Economics.
  6. Topa, Giorgio, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 261-95, April.
  7. Lorenzo Cappellari & Konstantinos Tatsiramos, 2010. "Friends’ Networks and Job Finding Rates," DISCE - Quaderni dell'Istituto di Economia dell'Impresa e del Lavoro ieil0059, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  8. Giacomo Pasini & Giovanni Millo, 2006. "Does Social Capital reduce moral hazard? A network model for non-life insurance demand," Working Papers 2006_59, Department of Economics, University of Venice "Ca' Foscari".
  9. Jonathan Conning, 2000. "Monitoring by Peers or by Delegates? Joint Liability Loans under Moral Hazard," Department of Economics Working Papers 2000-07, Department of Economics, Williams College.
  10. Aslund, Olof & Hensvik, Lena & Nordström Skans, Oskar, 2009. "Seeking Similarity: How Immigrants and Natives Manage at the Labor Market," IZA Discussion Papers 4640, Institute for the Study of Labor (IZA).
  11. Kahn, Lisa B., 2010. "The long-term labor market consequences of graduating from college in a bad economy," Labour Economics, Elsevier, vol. 17(2), pages 303-316, April.
  12. Corak, Miles & Piraino, Patrizio, 2010. "Intergenerational Earnings Mobility and the Inheritance of Employers," IZA Discussion Papers 4876, Institute for the Study of Labor (IZA).
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. La importancia de tener conexiones (¡y también buenos datos!)
    by Manuel Bagues in Nada Es Gratis on 2013-09-26 05:00:50
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Cited by:
  1. Berardi, N., 2013. "Social networks and wages in Senegal’s formal sector," Working papers 429, Banque de France.
  2. Nordman, Christophe Jalil & Pasquier-Doumer, Laure, 2014. "Transitions in a West African Labour Market: The Role of Family Networks," IZA Discussion Papers 8349, Institute for the Study of Labor (IZA).
  3. Carla Calero & Veronica Gonzales & Yuri Soares & Jochen Kluve & Carlos Henrique Corseuilt, 2014. "Can Arts-Based Interventions Enhance Labor Market Outcomes among Youth? Evidence from a Randomized Trial in Rio de Janeiro," Ruhr Economic Papers 0486, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  4. Durante, Ruben & Labartino, Giovanna & Perotti, Roberto, 2011. "Academic Dynasties: Decentralization and Familism in the Italian Academia," CEPR Discussion Papers 8645, C.E.P.R. Discussion Papers.
  5. Hensvik, Lena & Nordström Skans, Oskar, 2013. "Social networks, employee selection and labor market outcomes," Working Paper Series 2013:15, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  6. Anna Zaharieva, 2011. "Social Welfare and Wage Inequality in Search Equilibrium with Personal Contacts," Working Papers 459, Bielefeld University, Center for Mathematical Economics.
  7. Venke Furre Haaland & Mari Rege & Kjetil Telle & Mark Votruba, 2014. "The intergenerational transfer of the employment gender gap," Discussion Papers 767, Research Department of Statistics Norway.
  8. Yuliia Stupnytska, 2014. "Explaining the U-Shape of the Referral Hiring Pattern in a Search Model with Heterogeneous Workers," Working Papers 511, Bielefeld University, Center for Mathematical Economics.

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