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The Role of Referrals in Immobility, Inequality, and Inefficiency in Labor Markets

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  • Lukas Bolte
  • Nicole Immorlica
  • Matthew O. Jackson

Abstract

We study the consequences of job markets’ heavy reliance on referrals. Referrals lead to more opportunities for workers to be hired, which lead to better matches and increased productivity but also disadvantage job seekers with few or no connections to employed workers, increasing inequality. Coupled with homophily, referrals also lead to immobility. We identify conditions under which distributing referrals more evenly reduces inequality and improves future productivity and mobility. We use the model to examine the short- and long-run welfare impacts of policies such as affirmative action and algorithmic fairness.

Suggested Citation

  • Lukas Bolte & Nicole Immorlica & Matthew O. Jackson, 2026. "The Role of Referrals in Immobility, Inequality, and Inefficiency in Labor Markets," Journal of Labor Economics, University of Chicago Press, vol. 44(2), pages 447-479.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/733048
    DOI: 10.1086/733048
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    Cited by:

    1. is not listed on IDEAS
    2. Alastair Langtry, 2022. "Keeping up with "The Joneses": reference dependent choice with social comparisons," Papers 2203.10305, arXiv.org, revised Aug 2022.
    3. Barigozzi, Francesca & Cremer, Helmuth, 2024. "Shining with the stars: Competition, screening, and concern for coworkers' quality," Games and Economic Behavior, Elsevier, vol. 144(C), pages 250-283.
    4. Mylius, F., 2023. "Why Personal Ties (Still) Matter: Referrals and Congestion," Cambridge Working Papers in Economics 2356, Faculty of Economics, University of Cambridge.

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