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How do social networks affect labor markets?

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  • Ian Schmutte

    (University of Georgia, USA)

Abstract

Social networks, or “job-referral” networks, can help make labor markets become more efficient. Outside the firm, they help workers obtain employment after displacement and secure higher-paying jobs. They can also match highly-skilled workers to more productive employment. Inside the firm, referrals facilitate employment relationships that are more stable, productive, and profitable. In aggregate, referral networks help “grease the wheels” of a labor market that can be beset by a range of information problems. However, such networks can also be segmented along racial, ethnic, and socio-economic lines, which brings into question the effect they may have on inequality between and within different groups of workers.

Suggested Citation

  • Ian Schmutte, 2016. "How do social networks affect labor markets?," IZA World of Labor, Institute of Labor Economics (IZA), pages 304-304, October.
  • Handle: RePEc:iza:izawol:journl:y:2016:n:304
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    referral networks; wages; unemployment; inequality; social interactions;
    All these keywords.

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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