Do Job Seekers Benefit from Contacts? A Direct Test with Contemporaneous Searches

Although it is intuitively plausible that a job seeker benefits by using contacts in her job search, the literature is plagued by theoretical disagreements and inconclusive empirical evidence. Single-firm studies consistently find that job seekers applying through referrals achieve better labor-market outcomes than job seekers applying without referrals, but the evidence from job-seeker studies is mixed. To solve this puzzle, we clarify the distinction between having social capital and using contacts as a search method. We present theoretical reasons to suggest that the lack of an association between a job seeker's social capital and whether or not she uses social networks to search for a job should not be taken to imply that job seekers who use social networks to search for jobs do not benefit from using contacts. We exploit a strategic research setting, the school-to-work transition of 291 university graduates who engaged in 3,112 contemporaneous job searches, to show that although a job seeker's social capital may not affect whether or not she uses contacts to search for a job, using contacts as a job-search method does improve her job-search outcomes. We conclude by discussing the implications of our findings for the literature on job search and social networks. This paper was accepted by Jesper Sørensen, organizations.