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Who Gets the Job Referral? Evidence from a Social Networks Experiment

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  • Lori Beaman
  • Jeremy Magruder

Abstract

We use recruitment into a laboratory experiment in Kolkata, India to analyze how social networks select individuals for jobs. The experiment allows subjects to refer actual network members for casual jobs as experimental subjects under exogenously varied incentive contracts. We provide evidence that some workers, those who are high ability, have useful information about the abilities of members of their social network. However, the experiment also shows that social networks provide incentives to refer less qualified workers, and firms must counterbalance these incentives in order to effectively use existing employees to help overcome their screening problem.

Suggested Citation

  • Lori Beaman & Jeremy Magruder, 2012. "Who Gets the Job Referral? Evidence from a Social Networks Experiment," American Economic Review, American Economic Association, vol. 102(7), pages 3574-3593, December.
  • Handle: RePEc:aea:aecrev:v:102:y:2012:i:7:p:3574-93 Note: DOI: 10.1257/aer.102.7.3574
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    References listed on IDEAS

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    1. Georganas, Sotiris & Healy, Paul J. & Weber, Roberto A., 2015. "On the persistence of strategic sophistication," Journal of Economic Theory, Elsevier, pages 369-400.
    2. Vincent P. Crawford & Miguel A. Costa-Gomes, 2006. "Cognition and Behavior in Two-Person Guessing Games: An Experimental Study," American Economic Review, American Economic Association, pages 1737-1768.
    3. Vincent P. Crawford & Miguel A. Costa-Gomes, 2006. "Cognition and Behavior in Two-Person Guessing Games: An Experimental Study," American Economic Review, American Economic Association, pages 1737-1768.
    4. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, pages 1313-1326.
    5. Rosenthal, Robert W., 1981. "Games of perfect information, predatory pricing and the chain-store paradox," Journal of Economic Theory, Elsevier, vol. 25(1), pages 92-100, August.
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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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