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Referral-based Job Search Networks

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Author Info

  • Christian Dustmann

    () (University College London)

  • Albrecht Glitz

    () (Universitat Pompeu Fabra and Barcelona GSE)

  • Uta Schoenberg

    () (University College London and Institute for Employment Research (IAB))

Abstract

This paper develops a model and derives novel testable implications of referral-based job search networks in which employees provide employers with information about potential job market candidates that they otherwise would not have. Using unique matched employeremployee data that cover the entire workforce in one large metropolitan labor market over a 20 year period, we find strong support for the predictions of our model. We first show that firms are more likely to hire minority workers from a particular group if the existing share of workers from that group employed in the firm is higher. We then provide evidence that workers earn higher wages, and are less likely to leave their firms, if they were hired by a firm with a larger share of minority workers from their own group and are therefore more likely to have obtained the job through a referral. The effects are particularly strong at the beginning of the employment relationship and decline with tenure in the firm. These findings have important implications in suggesting that job search networks help to reduce informational deficiencies in the labor market and lead to productivity gains for workers and firms.

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Bibliographic Info

Paper provided by Norface Research Programme on Migration, Department of Economics, University College London in its series Norface Discussion Paper Series with number 2011012.

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Date of creation: Jul 2011
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Handle: RePEc:nor:wpaper:2011012

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Keywords: Networks; Referrals; Uncertainty;

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References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Job referrals can be more efficient than open search
    by Economic Logician in Economic Logic on 2011-08-17 14:59:00
  2. Professors Using Linkedin Could Lead to Productivity Gains
    by Seth Gitter in The Blog of Diminishing Returns on 2011-08-24 19:19:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
Cited by:
  1. Deepti Goel & Kevin Lang, 2009. "Social Ties and the Job Search of Recent Immigrants," NBER Working Papers 15186, National Bureau of Economic Research, Inc.
  2. 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).
  3. 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).
  4. repec:ese:iserwp:2011-21 is not listed on IDEAS
  5. Christian Dustmann & Albrecht Glitz, 2011. "Migration and Education," CReAM Discussion Paper Series 1105, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  6. Judith K. Hellerstein & David Neumark, 2011. "Employment in Black Urban Labor Markets: Problems and Solutions," NBER Working Papers 16986, National Bureau of Economic Research, Inc.

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