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How Much Do Employers Learn from Referrals?

  • JOSHUA C. PINKSTON

This paper tests the hypothesis that referrals from various sources provide employers with more information about job applicants than they would have without a referral. I use data from the 1982 EOPP Survey of employers that contain information on two workers in the same job, allowing me to cancel out differences in job and firm characteristics and control for the possibility that workers with referrals from different sources (or no referral at all) might sort into jobs that put different weights on individual performance. My estimation results provide evidence consistent with referrals from friends and family members providing employers with more information than they would have otherwise. Despite the information they provide, however, it appears as though referrals from family members are associated with jobs that put less weight on performance overall. On the other hand, referrals from other employers or labor unions appear to provide little, if any, information but are associated with jobs that put more weight on performance than the average job does. I find no evidence that referrals from schools, community organizations or other sources provide useful information.

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File URL: http://hdl.handle.net/10.1111/j.1468-232X.2012.00679.x
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Article provided by Wiley Blackwell in its journal Industrial Relations: A Journal of Economy and Society.

Volume (Year): 51 (2012)
Issue (Month): 2 (04)
Pages: 317-341

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Handle: RePEc:bla:indres:v:51:y:2012:i:2:p:317-341
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  1. Blau, David M & Robins, Philip K, 1990. "Job Search Outcomes for the Employed and Unemployed," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 637-55, June.
  2. Kugler, Adriana, 2002. "Employee Referrals and Efficiency Wages," IZA Discussion Papers 633, Institute for the Study of Labor (IZA).
  3. Cornell, Bradford & Welch, Ivo, 1996. "Culture, Information, and Screening Discrimination," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 542-71, June.
  4. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  5. Dennis J. Aigner & Glen G. Cain, 1977. "Statistical theories of discrimination in labor markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(2), pages 175-187, January.
  6. Pinkston, Joshua C., 2003. "Screening discrimination and the determinants of wages," Labour Economics, Elsevier, vol. 10(6), pages 643-658, December.
  7. Harry J. Holzer, 1987. "Hiring Procedures in the Firm: Their Economic Determinants and Outcomes," NBER Working Papers 2185, National Bureau of Economic Research, Inc.
  8. Simon, Curtis J & Warner, John T, 1992. "Matchmaker, Matchmaker: The Effect of Old Boy Networks on Job Match Quality, Earnings, and Tenure," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 306-30, July.
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