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Do workers really benefit from their social networks?

  • François Fontaine

This paper provides a simple matching model in which unemployed workers and employers can be matched together through social networks or through more ?formal? methods of search. We show that, in some case, networks substitute for labor market and that this crowding-out effect may be socially costly. For that reason, a policy increasing the social capital of the disadvantaged workers can increase the unemployment rate and decrease workers? output. JEL Classification: E24, J64, J68, Z13.

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Article provided by De Boeck Université in its journal Recherches économiques de Louvain.

Volume (Year): 74 (2008)
Issue (Month): 1 ()
Pages: 5-31

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Handle: RePEc:cai:reldbu:rel_741_0005
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  1. Holzer, Harry J, 1988. "Search Method Use by Unemployed Youth," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 1-20, January.
  2. Barbara Petrongolo & Christopher Pissarides, 2000. "Looking into the black box: a survey of the matching function," LSE Research Online Documents on Economics 2122, London School of Economics and Political Science, LSE Library.
  3. Brown, Martin & Falk, Armin & Fehr, Ernst, 2003. "Relational Contracts and the Nature of Market Interactions," IZA Discussion Papers 897, Institute for the Study of Labor (IZA).
  4. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2003. "Wage bargaining with on-the-job search : theory and evidence," Research Unit Working Papers 0212, Laboratoire d'Economie Appliquee, INRA.
  5. Samuel Bentolila & Claudio Michelacci & Javier Suarez, 2010. "Social Contacts and Occupational Choice," Economica, London School of Economics and Political Science, vol. 77(305), pages 20-45, 01.
  6. Gregg, Paul & Wadsworth, Jonathan, 1996. "How Effective Are State Employment Agencies? Jobcentre Use and Job Matching in Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 443-67, August.
  7. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  8. John T. Addison & Pedro Portugal, 1998. "Job Search Methods and Outcomes," Working Papers w199808, Banco de Portugal, Economics and Research Department.
  9. Kugler, Adriana D., 2002. "Employee Referrals and Efficiency Wages," CEPR Discussion Papers 3682, C.E.P.R. Discussion Papers.
  10. Samuel Bentolila & Andrea Ichino, 2000. "Unemployment and Consumption: Are Job Losses Less Painful near the Mediterranean?," CESifo Working Paper Series 372, CESifo Group Munich.
  11. Antoni Calvó-Armengol & Matthew O. Jackson, 2004. "The Effects of Social Networks on Employment and Inequality," American Economic Review, American Economic Association, vol. 94(3), pages 426-454, June.
  12. Cahuc, Pierre & Fontaine, Francois, 2002. "On the Efficiency of Job Search with Social Networks," IZA Discussion Papers 583, Institute for the Study of Labor (IZA).
  13. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "Job reallocation, employment fluctuations and unemployment," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 18, pages 1171-1228 Elsevier.
  14. James Albrecht, Pieter Gautier, & Susan Vroman, 2003. "Equilibrium Directed Search with Multiple Application," Working Papers gueconwpa~03-03-02, Georgetown University, Department of Economics.
  15. Calvo-Armengol, Antoni & Zenou, Yves, 2005. "Job matching, social network and word-of-mouth communication," Journal of Urban Economics, Elsevier, vol. 57(3), pages 500-522, May.
  16. 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.
  17. Harry J. Holzer, 1987. "Hiring Procedures in the Firm: Their Economic Determinants and Outcomes," NBER Working Papers 2185, National Bureau of Economic Research, Inc.
  18. Margolis, David N. & Simonnet, Véronique, 2003. "Educational Track, Networks and Labor Market Outcomes," IZA Discussion Papers 699, Institute for the Study of Labor (IZA).
  19. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  20. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 375-410, July.
  21. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Organizational Design and Technology Choice under Intrafirm Bargaining," American Economic Review, American Economic Association, vol. 86(1), pages 195-222, March.
  22. Marmaros, David & Sacerdote, Bruce, 2002. "Peer and social networks in job search," European Economic Review, Elsevier, vol. 46(4-5), pages 870-879, May.
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