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Social Contacts and Occupational Choice

Author

Listed:
  • Samuel Bentolila
  • Claudio Michelacci
  • Javier Suarez

Abstract

Social contacts help workers to find jobs, but those jobs need not be in the occupations where workers are most productive. Hence social contacts can generate mismatch between a worker's occupational choice and his comparative productive advantage. Thus economies with dense social networks can exhibit apparently low labor force quality and, as a result, low returns to firms' investment and depressed aggregate productivity. We employ US and European data for the 1990's to test the key prediction that social contacts distort workers' occupational choices in a direction that reduces their apparent productivity. We find that the use of social contacts helps find jobs one to two months sooner but leads to individual wage discounts of 5% to 7% and produces negative externalities on aggregate productivity.

Suggested Citation

  • Samuel Bentolila & Claudio Michelacci & Javier Suarez, 2004. "Social Contacts and Occupational Choice," Working Papers wp2004_0406, CEMFI.
  • Handle: RePEc:cmf:wpaper:wp2004_0406
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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