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Friends’ Networks and Job Finding Rates

  • Lorenzo Cappellari

    ()

    (DISCE, Università Cattolica)

  • Konstantinos Tatsiramos

    ()

    (Institute for the Study of Labor Bonn)

We investigate the effect of social interactions on labor market outcomes using a direct measure of social contacts based on information about individuals’ three best friends and their characteristics. We examine the effect of the number of employed friends on the transition from non-employment to employment, and we find the existence of significant network effects at the individual level. An additional employed friend increases the probability of finding a job by 3.7 percentage points. This finding is robust to specifications that address the endogeneity of friends’ employment status, which may be induced by correlation with unobserved individual attributes and feedback effects. Considering labor market outcomes, we find evidence of higher wages and employment stability for those with more employed friends, which is consistent with networks acting as an information transmission mechanism.

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File URL: http://www.unicatt.it/Istituti/EconomiaImpresaLavoro/Quaderni/ieil0059.pdf
File Function: First version, 2010
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Paper provided by Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) in its series DISCE - Quaderni dell'Istituto di Economia dell'Impresa e del Lavoro with number ieil0059.

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Length: 32
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:ctc:serie4:ieil0059
Contact details of provider: Web page: http://www.unicatt.it/Istituti/EconomiaImpresaLavoro
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  19. Stephen L. Ross, 2009. "Social Interactions within Cities: Neighborhood Environments and Peer Relationships," Working papers 2009-31, University of Connecticut, Department of Economics.
  20. Lorenzo Cappellari & Stephen P. Jenkins, 2008. "Estimating low pay transition probabilities accounting for endogenous selection mechanisms," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 57(2), pages 165-186.
  21. Mortensen, Dale T. & Vishwanath, Tara, 1994. "Personal contacts and earnings : It is who you know!," Labour Economics, Elsevier, vol. 1(2), pages 187-201, March.
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  25. Ian M. Schmutte, 2015. "Job Referral Networks and the Determination of Earnings in Local Labor Markets," Journal of Labor Economics, University of Chicago Press, vol. 33(1), pages 1 - 32.
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  28. Lori A. Beaman, 2012. "Social Networks and the Dynamics of Labour Market Outcomes: Evidence from Refugees Resettled in the U.S," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 128-161.
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