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Information Networks and Worker Recruitment

  • Arthur Schram
  • Jordi Brandts
  • Klarita Gërxhani

This paper studies experimentally how the existence of social information networks affects the ways in which firms recruit new personnel. Through such networks firms learn about prospective employeesí performance in previous jobs. Assuming individualistic preferences social networks are predicted not to affect overall labor market behavior, while with social preferences the prediction is that when bilaterally negotiated: (i) wages will be higher and (ii) that workers in jobs with incomplete contracts will respond with higher effort. Our experimental results are consistent with the social preferences view, both for the case of excess demand and excess supply of labor. In particular, the presence of information networks leads to more efficient allocations.

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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 316.

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Date of creation: Jun 2007
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Handle: RePEc:bge:wpaper:316
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