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Explaining U-shape of the referral hiring pattern in a search model with heterogeneous workers

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  • Stupnytska, Yuliia
  • Zaharieva, Anna

Abstract

This paper presents a search model with heterogeneous workers, social networks and endogenous search intensity. There are three job search channels: costly formal applications and two costless informal channels – through family and professional networks. Our model explains a U-shape referral hiring pattern observed in empirical studies and a strong selection of workers on productivity across the three channels. Moreover, combining family and professional referrals into one informal channel may generate a spurious result of wage premiums (penalties) if high (low) productivity workers are dominating in the empirical data and their productivity is not fully observable to the econometrician.

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  • 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.
  • Handle: RePEc:eee:jeborg:v:119:y:2015:i:c:p:211-233
    DOI: 10.1016/j.jebo.2015.08.012
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    Cited by:

    1. Stupnytska, Yuliia, 2015. "Asymmetric information in a search model with social contacts," Center for Mathematical Economics Working Papers 548, Center for Mathematical Economics, Bielefeld University.
    2. 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.
    3. Zaharieva, Anna, 2015. "On the Puzzle of Diversification in Social Networks with Occupational Mismatch," Center for Mathematical Economics Working Papers 547, Center for Mathematical Economics, Bielefeld University.
    4. repec:eee:labeco:v:50:y:2018:i:c:p:112-127 is not listed on IDEAS

    More about this item

    Keywords

    Family contacts; Professional networks; U-shape; Referral puzzle; Wage premiums; Wage penalties;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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