IDEAS home Printed from
   My bibliography  Save this paper

Informal Referrals, Employment and Wages: Seeking Causal Directions


  • Ana Maria DIAZ E

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))


Employers and job seekers rely extensively on job informational networks to fill vacancies or to find a job. The widespread use of job contacts to find work has been largely associated with labor outcomes, such as finding a job or even affecting wages. Some scholars have claimed that informal referrals play a determinant role in reducing informational mismatches between potential employers and job seekers. Although several studies have shown that the use of friends and relatives is correlated with labor outcomes, little is known about the causal effect. In this article, I aim to identify whether there is a causal effect of using informal referrals on two main outcomes: the probability of being employed and hourly wages. I use a large data set from Colombia, the Living Standard Survey 2003, to contrast the results from three main methodologies: standard OLS estimation, propensity-score matching, and instrumental variables. Results suggest that much of the positive effect of using informal referrals on employment reflects the prevalence of informal-sector jobs to be filled through this method rather than a causal effect. On the contrary, the results for hourly wages suggest a negative causal effect of using job informational networks, which is explained by the low-quality/poor matches theory. Yet, this is only true in formal-sector firms.

Suggested Citation

  • Ana Maria DIAZ E, 2009. "Informal Referrals, Employment and Wages: Seeking Causal Directions," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2009023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2009023

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Alesina, Alberto & Devleeschauwer, Arnaud & Easterly, William & Kurlat, Sergio & Wacziarg, Romain, 2003. "Fractionalization," Journal of Economic Growth, Springer, vol. 8(2), pages 155-194, June.
    2. Bauer, Thomas K. & Epstein, Gil S. & Gang, Ira N., 2002. "Herd Effects or Migration Networks? The Location Choice of Mexican Immigrants in the U.S," IZA Discussion Papers 551, Institute for the Study of Labor (IZA).
    3. B. Davis & P. Winters, 2001. "Gender, Networks and Mexico-US Migration," Journal of Development Studies, Taylor & Francis Journals, vol. 38(2), pages 1-26.
    4. Guillermina Jasso & Mark Rosenzweig, 1986. "Family reunification and the immigration multiplier: U.S. immigration law, origin-country conditions, and the reproduction of immigrants," Demography, Springer;Population Association of America (PAA), vol. 23(3), pages 291-311, August.
    5. Alessandra Faggian & Philip McCann & Stephen Sheppard, 2007. "Some Evidence That Women Are More Mobile Than Men: Gender Differences In U.K. Graduate Migration Behavior," Journal of Regional Science, Wiley Blackwell, vol. 47(3), pages 517-539.
    6. Aycan Çelikaksoy & Helena Nielsen & Mette Verner, 2006. "Marriage migration: just another case of positive assortative matching?," Review of Economics of the Household, Springer, vol. 4(3), pages 253-275, September.
    7. Coulombe Serge & Tremblay Jean-François, 2006. "Literacy and Growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(2), pages 1-34, August.
    8. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
    9. Andrew R. Morrison & Maurice Schiff & Mirja Sjöblom, 2007. "The International Migration of Women," World Bank Publications, The World Bank, number 6804.
    10. Gil S. Epstein & Ira N. Gang, 2006. "The Influence of Others on Migration Plans," Review of Development Economics, Wiley Blackwell, vol. 10(4), pages 652-665, November.
    11. Stephen Knowles & Paula K. Lorgelly, 2002. "Are educational gender gaps a brake on economic development? Some cross-country empirical evidence," Oxford Economic Papers, Oxford University Press, vol. 54(1), pages 118-149, January.
    12. Sara Curran & Estela Rivero-Fuentes, 2003. "Engendering migrant networks: The case of Mexican migration," Demography, Springer;Population Association of America (PAA), vol. 40(2), pages 289-307, May.
    13. Abdeslam Marfouk, 2007. "Brain Drain in Developing Countries," World Bank Economic Review, World Bank Group, vol. 21(2), pages 193-218, June.
    14. Cobb-Clark, Deborah A, 1993. "Immigrant Selectivity and Wages: The Evidence for Women," American Economic Review, American Economic Association, vol. 83(4), pages 986-993, September.
    15. Dumont, Jean-Christophe & Martin, John P. & Spielvogel, Gilles, 2007. "Women on the Move: The Neglected Gender Dimension of the Brain Drain," IZA Discussion Papers 2920, Institute for the Study of Labor (IZA).
    16. Frédéric Docquier & B. Lindsay Lowell & Abdeslam Marfouk, 2009. "A Gendered Assessment of Highly Skilled Emigration," Population and Development Review, The Population Council, Inc., vol. 35(2), pages 297-321.
    17. Marcela Cerrutti & Douglas Massey, 2001. "On the auspices of female migration from Mexico to the United States," Demography, Springer;Population Association of America (PAA), vol. 38(2), pages 187-200, May.
    18. Blackden, Mark & Canagarajah, Sudharshan & Klasen, Stephan & Lawson, David, 2006. "Gender and Growth in Sub-Saharan Africa: Issues and Evidence," WIDER Working Paper Series 037, World Institute for Development Economic Research (UNU-WIDER).
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Catia Nicodemo & Gustavo Adolfo García, 2015. "Job Search Channels, Neighborhood Effects, and Wages Inequality in Developing Countries: The Colombian Case," The Developing Economies, Institute of Developing Economies, vol. 53(2), pages 75-99, June.
    2. Bilyk Olga & Sheron Iuliia, 2012. "Do informal networks matter in the Ukrainian labor market?," EERC Working Paper Series 12/11e, EERC Research Network, Russia and CIS.

    More about this item


    informal referrals; job search methods; employment rates; hourly wages; selec- tion bias; OLS; Propensity-Score Matching; Instrumental Variables; Roy Model;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • 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
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ctl:louvir:2009023. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne DAVISTER-LOGIST). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.