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Occupational mismatch and social networks

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  • Horváth, Gergely

Abstract

A labor market model with heterogeneous workers and jobs is provided to investigate the effects of social networks as a job information channel regarding the level of mismatch between workers and firms. The efficiency in producing good matches of the formal market is compared to that of social networks. It is assumed that links between workers represent favoring relationships: workers recommend each other for any kinds of jobs, regardless of the quality of the resulting match. This study shows that as the fraction of ties connecting similar agents (homophily) increases, the level of mismatch decreases. If this fraction is sufficiently high, networks provide good matches at a higher rate than the formal market, for any efficiency level of the market. In this case, the mismatch level is lower in economies with social networks than it would be if workers did not use social contacts for job search. Hence, the presence of social networks can reduce mismatch despite favoritism. Implications of mismatch creation for the expected wages of jobs obtainable through different search methods are also discussed.

Suggested Citation

  • Horváth, Gergely, 2014. "Occupational mismatch and social networks," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 442-468.
  • Handle: RePEc:eee:jeborg:v:106:y:2014:i:c:p:442-468
    DOI: 10.1016/j.jebo.2014.07.017
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    References listed on IDEAS

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    Cited by:

    1. Rebien, Martina & Stops, Michael & Zaharieva, Anna, 2017. "Formal search and referrals from a firm's perspective," Center for Mathematical Economics Working Papers 578, Center for Mathematical Economics, Bielefeld University.
    2. Stupnytska, Yuliia & Zaharieva, Anna, 2015. "Explaining U-shape of the referral hiring pattern in a search model with heterogeneous workers," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 211-233.
    3. repec:eee:labeco:v:50:y:2018:i:c:p:112-127 is not listed on IDEAS

    More about this item

    Keywords

    Social networks; Labor market search; Occupational mismatch; Homophily;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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