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Coworker Networks and the Labor Market Outcomes of Displaced Workers: Evidence from Portugal

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  • Jose Garcia-Louzao
  • Marta Silva

Abstract

The use of social contacts in the labor market is widespread. This paper investigates the impact of personal connections on hiring probabilities and re-employment outcomes of displaced workers in Portugal. We rely on rich matched employer-employee data to define personal connections that arise from interactions at the workplace. Our empirical strategy exploits firm closures to select workers who are exogenously forced to search for a new job and leverages variation across displaced workers with direct connections to prospective employers. The hiring analysis indicates that displaced workers with a direct link to a firm through a former coworker are three times more likely to be hired compared to workers displaced from the same closing event who lack such a tie. However, we find that the effect varies according to the type of connection as well as firms’ similarity. Finally, we show that successful displaced workers with a connection in the hiring firm have higher entry-level wages and enjoy greater job security although these advantages disappear over time.

Suggested Citation

  • Jose Garcia-Louzao & Marta Silva, 2023. "Coworker Networks and the Labor Market Outcomes of Displaced Workers: Evidence from Portugal," CESifo Working Paper Series 10442, CESifo.
  • Handle: RePEc:ces:ceswps:_10442
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    More about this item

    Keywords

    job displacement; coworker networks; re-employment;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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