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Social connections and the sorting of workers to firms

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  • Eliason, Marcus
  • Hensvik, Lena
  • Kramarz, Francis
  • Skans, Oskar Nordström

Abstract

We assess the presumption that social networks reinforce inequality by providing high-wage workers’ with preferential access to high-wage establishments. Our results based on very detailed Swedish register data contradict this view. We do show that high-wage job seekers tend to be connected to high-wage workers employed in high-wage establishments. Furthermore, social connections appear to directly cause the allocation of workers to jobs. But the sorting resulting from hires within social networks is less unequal than the sorting resulting from market hires, essentially because low-wage firms rely on social connections to hire high-wage workers.

Suggested Citation

  • Eliason, Marcus & Hensvik, Lena & Kramarz, Francis & Skans, Oskar Nordström, 2023. "Social connections and the sorting of workers to firms," Journal of Econometrics, Elsevier, vol. 233(2), pages 468-506.
  • Handle: RePEc:eee:econom:v:233:y:2023:i:2:p:468-506
    DOI: 10.1016/j.jeconom.2021.12.018
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    2. Chen-Zion, Ayal & Rauch, James E., 2020. "History dependence, cohort attachment, and job referrals in networks of close relationships," Journal of Economic Behavior & Organization, Elsevier, vol. 170(C), pages 75-95.
    3. Marta Silva & José Garcia-Louzão, 2021. "Coworker Networks and the Labor Market Outcomes of Displaced Workers: Evidence from Portugal," Working Papers w202121, Banco de Portugal, Economics and Research Department.
    4. Albrecht Glitz & Rune Vejlin, 2021. "Learning through Coworker Referrals," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 42, pages 37-71, October.
    5. Youze Lang & Youzhi Yang, 2024. "An Equilibrium Labor Market Model With Internal And External Referrals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 655-692, May.
    6. Arellano-Bover, Jaime & San, Shmuel, 2023. "The Role of Firms and Job Mobility in the Assimilation of Immigrants: Former Soviet Union Jews in Israel 1990–2019," IZA Discussion Papers 16389, Institute of Labor Economics (IZA).
    7. Pedro Portugal, 2020. "The sources of wage variability in Portugal: a binge reading survey," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    8. Jose Garcia‐Louzao & Marta Silva, 2024. "Coworker networks and the labor market outcomes of displaced workers: Evidence from Portugal," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 63(3), pages 389-413, July.
    9. Eliason, Marcus & Hensvik, Lena & Kramarz, Francis & Skans, Oskar Nordström, 2023. "Social connections and the sorting of workers to firms," Journal of Econometrics, Elsevier, vol. 233(2), pages 468-506.
    10. Ilyés, Virág & Sebők, Anna, 2020. "Egyetemről a munkaerőpiacra. Felsőoktatási ismeretségek hatása a munkaerőpiaci kilátásokra [From university to working life - the effect peers in higher education have on labour-market outcomes]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 993-1028.
    11. Gyetvai, Attila & Zhu, Maria, 2021. "Coworker Networks and the Role of Occupations in Job Finding," IZA Discussion Papers 14615, Institute of Labor Economics (IZA).
    12. Perihan Ozge Saygin & Andrea Weber & Michèle A. Weynandt, 2021. "Coworkers, Networks, and Job-Search Outcomes among Displaced Workers," ILR Review, Cornell University, ILR School, vol. 74(1), pages 95-130, January.
    13. Anna Baranowska-Rataj & Zoltán Elekes & Rikard Eriksson, 2021. "Escaping from Low-Wage Employment: The Role of Co-worker Networks," CERS-IE WORKING PAPERS 2123, Institute of Economics, Centre for Economic and Regional Studies.
    14. Boza István & Ilyés Virág, 2020. "Decomposition of co-worker wage gains," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-31, March.

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    More about this item

    Keywords

    Networks; Job search; Inequality; Job displacement; Hiring;
    All these keywords.

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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