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Endogenous job contact networks

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Author Info

  • Luca P. Merlino Autonoma
  • Andrea Galeotti

    (Essex)

Abstract

We use the UK Quarterly Labour Force Survey to document the presence of: one, a positive correlation between unemployment rate and the proportion of job seekers who use social networks to find jobs and, two a non-monotonic relation between unemployment rate and the proportion of job seekers who use social networks to find jobs--network productivity. This second relation is positive for low levels of unemployment rate, while it becomes negative for high levels of unemployment rate. Existing models of social networks and labor market generally assume that social networks are exogenous. This assumption implies a negative correlation between unemployment rate and network productivity. We develop a model where social networks are used to collect job offers, but workers decide strategically how much to invest in their network. We show that equilibrium job contact networks are dense and more productive in transmitting information when labor market turnover is moderate, while they are less productive and segmented into clusters for either high or low turnover. The equilibrium response of job contact networks to changes in labor market conditions is sufficient to generate the empirical patterns which we document for the UK

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 133.

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Date of creation: 2009
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Handle: RePEc:red:sed009:133

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References

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  1. Harminder Battu & Paul Seaman & Yves Zenou, 2010. "Job Contact Networks and the Ethnic Minorities," CReAM Discussion Paper Series 1028, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
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Citations

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Cited by:
  1. João Miguel Ejarque, 2009. "A Search Model with a Quasi-Network," Discussion Papers 10-23, University of Copenhagen. Department of Economics, revised Sep 2010.
  2. João Miguel Ejarque, 2010. "A search model with a quasi network," 2010 Meeting Papers 597, Society for Economic Dynamics.
  3. Cabrales, Antonio & Calvó-Armengol, Antoni & Zenou, Yves, 2011. "Social interactions and spillovers," Games and Economic Behavior, Elsevier, vol. 72(2), pages 339-360, June.
  4. Jacques Durieu & Hans Haller & Philippe Solal, 2011. "Nonspecific Networking," Games, MDPI, Open Access Journal, vol. 2(1), pages 87-113, February.
  5. repec:ese:iserwp:2011-21 is not listed on IDEAS
  6. Caliendo, Marco & Schmidl, Ricarda & Uhlendorff, Arne, 2010. "Social Networks, Job Search Methods and Reservation Wages: Evidence for Germany," IZA Discussion Papers 5165, Institute for the Study of Labor (IZA).
  7. Lorenzo Cappellari & Konstantinos Tatsiramos, 2011. "Friends’ Networks and Job Finding Rates," Discussion Papers in Economics 11/40, Department of Economics, University of Leicester.

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