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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
    Date of revision:
    Handle: RePEc:exe:wpaper:1309

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    Related research

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

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    1. 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.
    2. Francois Fontaine, 2004. "Why are similar workers paid differently? The role of social networks," 2004 Meeting Papers 493, Society for Economic Dynamics.
    3. 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.
    4. Antoni Calvó-Armengol & Matthew O. Jackson, 2003. "Networks in Labor Markets: Wage and Employment Dynamics and Inequality," Working Papers 55, Barcelona Graduate School of Economics.
    5. 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.
    6. Calvó-Armengol, Antoni & Zenou, Yves, 2001. "Job Matching, Social Network and Word-of-Mouth Communication," Seminar Papers 695, Stockholm University, Institute for International Economic Studies.
    7. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
    8. 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.
    9. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    10. Tolga U. Kuzubas, 2010. "Endogenous Social Networks in the Labor Market," Working Papers 2010/13, Bogazici University, Department of Economics.
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