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Do workers really benefit from their social networks?

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Author Info

  • Francois Fontaine

    (University of Paris 1 - Eurequa - CNRS)

Abstract

This paper provides a simple matching model in which unemployed workers and employers in large firms can be matched together through social networks or through more "formal" methods of search. We show that networks do not necessarily add new externalities and that some results previously obtained in the literature are questionable. Nevertheless, social networks can, in some case, substitute for labor market and this crowding-out effect may be socially costly. We show that a policy increasing the number of workers embedded in the social networks can increase the unemployment rate and decrease workers welfare. Since it is mostly the firms which benefit from larger social networks, transfers from the firms to the workers are necessary to make larger access to the social networks efficient.

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File URL: http://128.118.178.162/eps/mac/papers/0311/0311002.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0311002.

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Length: 30 pages
Date of creation: 06 Nov 2003
Date of revision: 07 Jan 2004
Handle: RePEc:wpa:wuwpma:0311002

Note: Type of Document - pdf; prepared on Win2000; pages: 30; figures: Yes (included)
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Web page: http://128.118.178.162

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Keywords: social networks; labor market; matching; unemployment; economic policy;

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References

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Citations

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Cited by:
  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. Zaharieva, Anna, 2013. "Double Matching: Social Contacts in a Labour Market with On-the-Job Search," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79891, Verein für Socialpolitik / German Economic Association.
  3. Walter Trockel, 2012. "Robustness of Intermediate Agreements for the Discrete Raiffa Solution," Working Papers 472, Bielefeld University, Center for Mathematical Economics.
  4. Zaharieva, Anna, 2013. "Social welfare and wage inequality in search equilibrium with personal contacts," Labour Economics, Elsevier, vol. 23(C), pages 107-121.
  5. Buhai, Sebastian & van der Leij, Marco, 2006. "A Social Network Analysis of Occupational Segregation," Working Papers 06-11, University of Aarhus, Aarhus School of Business, Department of Economics.
  6. Sabatini, Fabio, 2005. "Social capital, labour precariousness and the economic performance. An empirical assessment of the strength of weak ties in Italy," AICCON Working Papers 26-2005, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.

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