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Distributional effects of hiring through networks

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  • Yoske Igarashi

    (Department of Economics, University of Exeter)

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    Abstract

    How would a policy that bans the use of networks in hiring (e.g., anti-old boy network laws) affect welfare? To answer this question, we examine a variant of Galenianos (2013), a version of a random search model with two matching technologies: a standard matching function and worker networks. Our model has two types of workers, networked workers and non-networked workers. It is shown that the effects of such a policy on non-networked workers can be either positive or negative, depending on model parameters. In our calibration such a policy would make non-networked workers slightly worse off and networked workers substantially worse off.

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    File URL: http://people.exeter.ac.uk/cc371/RePEc/dpapers/DP1309.pdf
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    Bibliographic Info

    Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 1309.

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    Date of creation: 2013
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    Handle: RePEc:exe:wpaper:1309

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    Keywords: random search; network; referral; policy analysis; welfare; dynamics.;

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    1. Fontaine, François, 2008. "Why are similar workers paid differently? the role of social networks," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 3960-3977, December.
    2. Penn State & Manolis Galenianos, 2008. "Hiring through Referrals," 2008 Meeting Papers 672, Society for Economic Dynamics.
    3. Hagedorn, Marcus & Manovskii, Iourii, 2008. "The cyclical behavior of equilibrium unemployment and vacancies revisited," Working Paper Series 0853, European Central Bank.
    4. Calvó-Armengol, Antoni & Zenou, Yves, 2001. "Job Matching, Social Network and Word-of-Mouth Communication," CEPR Discussion Papers 2797, C.E.P.R. Discussion Papers.
    5. Adalbert Mayer, 2011. "Quantifying the effects of job matching through social networks," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 35-59, May.
    6. Calvo-Armengol, Antoni & Jackson, Matthew O., 2007. "Networks in labor markets: Wage and employment dynamics and inequality," Journal of Economic Theory, Elsevier, vol. 132(1), pages 27-46, January.
    7. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
    8. Montgomery, James D, 1991. "Social Networks and Labor-Market Outcomes: Toward an Economic Analysis," American Economic Review, American Economic Association, vol. 81(5), pages 1407-18, December.
    9. Harry J. Holzer, 1987. "Job search by employed and unemployed youth," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 40(4), pages 601-611, July.
    10. Tolga U. Kuzubas, 2010. "Endogenous Social Networks in the Labor Market," Working Papers 2010/13, Bogazici University, Department of Economics.
    11. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
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