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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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  1. Holzer, Harry J, 1987. "Informal Job Search and Black Youth Unemployment," American Economic Review, American Economic Association, vol. 77(3), pages 446-52, June.
  2. 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.
  3. Matt Jackson, 2003. "The Effects of Social Networks on Employment and Inequality," Theory workshop papers 658612000000000032, UCLA Department of Economics.
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  8. de Marti, Joan & Zenou, Yves, 2009. "Social Networks," Working Paper Series 816, Research Institute of Industrial Economics.
  9. Barron, John M & Berger, Mark C & Black, Dan A, 1997. "Employer Search, Training, and Vacancy Duration," Economic Inquiry, Western Economic Association International, vol. 35(1), pages 167-92, January.
  10. Adriana D. Kugler, 1997. "Employee referrals and the inter-industry wage structure," Economics Working Papers 252, Department of Economics and Business, Universitat Pompeu Fabra.
  11. Kugler, Adriana D., 2003. "Employee referrals and efficiency wages," Labour Economics, Elsevier, vol. 10(5), pages 531-556, October.
  12. Alan Manning, 1999. "Pretty Vacant: Recruitment in Low Wage Labour Markets," CEP Discussion Papers dp0418, Centre for Economic Performance, LSE.
  13. Cees Gorter & Jos Van Ommeren, 1999. "Sequencing, timing and filling rates of recruitment channels," Applied Economics, Taylor & Francis Journals, vol. 31(10), pages 1149-1160.
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  16. 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.
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  18. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  19. Franco Peracchi, 2002. "The European Community Household Panel: A review," Empirical Economics, Springer, vol. 27(1), pages 63-90.
  20. Roper, Stephen, 1988. "Recruitment Methods and Vacancy Duration," Scottish Journal of Political Economy, Scottish Economic Society, vol. 35(1), pages 51-64, February.
  21. Lindeboom, Maarten & van Ours, Jan C & Renes, Gusta, 1994. "Matching Employers and Workers: An Empirical Analysis on the Effectiveness of Search," Oxford Economic Papers, Oxford University Press, vol. 46(1), pages 45-67, January.
  22. Mortensen, D. T. & Vishwanath, T., 1995. "Personal contacts and earnings: It is who you know!," Labour Economics, Elsevier, vol. 2(1), pages 103-104, March.
  23. David Margolis & Véronique Simonnet, 2002. "Educational Track, Networks and Labor Market Outcomes," Working Papers 2002-60, Centre de Recherche en Economie et Statistique.
  24. Russo, Giovanni & Gorter, Cees & Schettkat, Ronald, 2001. "Searching, hiring and labour market conditions," Labour Economics, Elsevier, vol. 8(5), pages 553-571, December.
  25. 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.
  26. Bull, Clive & Ornati, Oscar & Tedeschi, Piero, 1987. "Search, Hiring Strategies, and Labor Market Intermediaries," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages S1-17, October.
  27. van Ours, J.C. & Lindeboom, M. & Renes, G., 1994. "Matching Employers and Workers : an Empirical Analysis on the Effectiveness of Search," Other publications TiSEM 3ada67c1-145c-42d0-8726-f, Tilburg University, School of Economics and Management.
  28. Barron, John M & Bishop, John & Dunkelberg, William C, 1985. "Employer Search: The Interviewing and Hiring of New Employees," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 43-52, February.
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