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Social Networks, Employee Selection, and Labor Market Outcomes

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Listed:
  • Lena Hensvik
  • Oskar Nordström Skans

Abstract

We provide a direct empirical test of Montgomery’s 1991 notion that firms hire workers through social ties of productive employees as these workers know others with high unobserved productivity. We focus on coworker networks and show that firms recruit workers with better military draft test scores but shorter schooling when hiring previous colleagues of current employees, suggesting that firms use these networks to attract workers with better qualities in hard-to-observe dimensions. Incumbent workers’ abilities predict the incidence, abilities, and wages of linked entrants. These results suggest that firms rely on the ability density of the studied networks when setting entry wages.

Suggested Citation

  • Lena Hensvik & Oskar Nordström Skans, 2016. "Social Networks, Employee Selection, and Labor Market Outcomes," Journal of Labor Economics, University of Chicago Press, vol. 34(4), pages 825-867.
  • Handle: RePEc:ucp:jlabec:doi:10.1086/686253
    DOI: 10.1086/686253
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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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    1. Social Networks, Employee Selection, and Labor Market Outcomes (JLE 2016) in ReplicationWiki

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