Referral networks and the allocation of talent
AbstractWe study a model of occupational choice where workers must rely on their social contacts to acquire job vacancy information. Contrary to the existing literature, we allow for worker heterogeneity in terms of their idiosyncratic skill-types. In this case, the allocation of talent (the matching of skills to tasks) becomes a welfare-relevant consideration. A worker’s skill-type determines both his relative cost of specialising in different occupations and his productivity on the job. The model shows that relying on word-of-mouth communication for job search generates both positive externalities (due to improved labour market matching) and negative externalities (due to a poor allocation of talent). Which effect dominates depends on the prop- erties of the job search and productivity functions. Taking into account worker heterogeneity shows that the degree of occupational segregation in competitive labour markets is generally not efficient.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 39895.
Date of creation: 06 Jul 2012
Date of revision:
Labour Markets; Social Networks;
Find related papers by JEL classification:
- J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
- J70 - Labor and Demographic Economics - - Labor Discrimination - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-14 (All new papers)
- NEP-LAB-2012-07-14 (Labour Economics)
- NEP-NET-2012-07-14 (Network Economics)
- NEP-URE-2012-07-14 (Urban & Real Estate Economics)
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