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Job Referral Networks and the Determination of Earnings in Local Labor Markets

Referral networks may affect the efficiency and equity of labor market outcomes, but few studies have been able to identify earnings effects empirically. To make progress, I set up a model of on-the-job search in which referral networks channel information about high-paying jobs. I evaluate the model using employer-employee matched data for the U.S. linked to the Census block of residence for each worker. The referral effect is identified by variations in the quality of local referral networks within narrowly defined neighborhoods. I find, consistent with the model, a positive and significant role for local referral networks on the full distribution of earnings outcomes from job search.

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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 10-40.

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Length: 37 pages
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:cen:wpaper:10-40
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  1. Conley, T.G. & Udry, C.R., 2000. "Learning about a New Technology: Pineapple in Ghana," Papers 817, Yale - Economic Growth Center.
  2. Giorgio Topa & Stephen Ross & Patrick Bayer, 2005. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," Working Papers 05-23, Center for Economic Studies, U.S. Census Bureau.
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  15. John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers 2002-06, Center for Economic Studies, U.S. Census Bureau.
  16. Conley, Timothy G. & Topa, Giorgio, 2007. "Estimating dynamic local interactions models," Journal of Econometrics, Elsevier, vol. 140(1), pages 282-303, September.
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