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Do Friends and Relatives Really Help in Getting a Good Job?

  • Michele Pellizzari

The available empirical evidence on the wage effect of finding jobs through informal contacts is mixed. This author theorizes that, depending upon the efficiency of formal search methods, the use of personal contacts can lead either to a wage premium or to a wage penalty. Using data from the European Community Household Panel (ECHP), the author finds new evidence to suggest that across many in the countries in the European Union, premiums and penalties to finding jobs through personal contacts are equally frequent and are of about the same size. The few instances of cross-country variation that do occur appear to reflect differences in the efficiency of formal search channels. In particular, the wage effect of finding jobs through personal contacts is higher in countries with more labor market intermediaries. Differences-in-differences estimates based on the Italian liberalization of the labor recruitment industry confirm this result.

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Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 63 (2010)
Issue (Month): 3 (April)
Pages: 494-510

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Handle: RePEc:ilr:articl:v:63:y:2010:i:3:p:494-510
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  19. Gautier, Pieter A., 2002. "Non-sequential search, screening externalities and the public good role of recruitment offices," Economic Modelling, Elsevier, vol. 19(2), pages 179-196, March.
  20. Alan Manning, 1999. "Pretty Vacant: Recruitment in Low Wage Labour Markets," CEP Discussion Papers dp0418, Centre for Economic Performance, LSE.
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  25. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
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  27. Harry J. Holzer, 1987. "Hiring Procedures in the Firm: Their Economic Determinants and Outcomes," NBER Working Papers 2185, National Bureau of Economic Research, Inc.
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  29. Luigi Pistaferri, 1999. "Informal Networks in the Italian Labor Market," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 58(3-4), pages 355-375, December.
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