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

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  • Ian Schmutte

Abstract

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.

Suggested Citation

  • Ian Schmutte, 2010. "Job Referral Networks and the Determination of Earnings in Local Labor Markets," Working Papers 10-40, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:10-40
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    More about this item

    Keywords

    Social Interactions; Informal Hiring Networks; Wage Variation; Neighborhood Effects;

    JEL classification:

    • 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
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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