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Social Networks, Job Search Methods and Reservation Wages: Evidence for Germany

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  • Marco Caliendo
  • Ricarda Schmidl
  • Arne Uhlendorff

Abstract

In this paper we analyze the relationship between social networks and the job search behavior of unemployed individuals. It is believed that networks convey useful information in the job search process such that individuals with larger networks should experience a higher productivity of informal search. Hence, job search theory suggests that individuals with larger networks use informal search channels more often and substitute from formal to informal search. Due to the increase in search productivity, it is also likely that individuals set higher reservation wages. We analyze these relations using a novel data set of unemployed individuals in Germany containing extensive information on job search behavior and direct measures for the social network of individuals. Our findings confirm theoretical expectations. Individuals with larger networks use informal search channels more often and shift from formal to informal search. We find that informal search is mainly considered a substitute for passive, less cost intensive search channels. In addition to that, we find evidence for a positive relationship between the network size and reservation wages.

Suggested Citation

  • Marco Caliendo & Ricarda Schmidl & Arne Uhlendorff, 2010. "Social Networks, Job Search Methods and Reservation Wages: Evidence for Germany," Discussion Papers of DIW Berlin 1055, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp1055
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Schmutte, Ian M., 2016. "Labor markets with endogenous job referral networks: Theory and empirical evidence," Labour Economics, Elsevier, vol. 42(C), pages 30-42.
    2. Amelie F. Constant & Martin Kahanec & Ulf Rinne & Klaus F. Zimmermann, 2011. "Ethnicity, job search and labor market reintegration of the unemployed," International Journal of Manpower, Emerald Group Publishing, vol. 32(7), pages 753-776, October.
    3. 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.
    4. Glitz, Albrecht, 2017. "Coworker networks in the labour market," Labour Economics, Elsevier, vol. 44(C), pages 218-230.
    5. Amelie F. Constant & Annabelle Krause & Ulf Rinne & Klaus F. Zimmermann, 2011. "Economic preferences and attitudes of the unemployed: Are natives and second generation migrants alike?," International Journal of Manpower, Emerald Group Publishing, vol. 32(7), pages 825-851, October.
    6. Rainer Eppel & Helmut Mahringer & Andrea Weber, 2014. "Job Search Behaviour and Job Search Success of the Unemployed," WIFO Working Papers 471, WIFO.
    7. Ralf Werner Koßmann, 2016. "Effectiveness of Social Capital in the Job Search Process," SOEPpapers on Multidisciplinary Panel Data Research 823, DIW Berlin, The German Socio-Economic Panel (SOEP).
    8. Caliendo, Marco & Uhlendorff, Arne, 2010. "Determinanten des Suchverhaltens von Arbeitslosen: Ausgewählte Erkenntnisse basierend auf dem IZA Evaluationsdatensatz," IZA Discussion Papers 5379, Institute for the Study of Labor (IZA).
    9. Wang, Chunchao & Zhang, Chenglei & Ni, Jinlan, 2015. "Social network, intra-network education spillover effect and rural–urban migrants' wages: Evidence from China," China Economic Review, Elsevier, vol. 35(C), pages 156-168.
    10. Andrea Morescalchi, 2016. "A new career in a new town. Job search methods and regional mobility of unemployed workers," ERSA conference papers ersa16p307, European Regional Science Association.
    11. Ronald Bachmann & Daniel Baumgarten, 2013. "How do the unemployed search for a job? – Evidence from the EU Labour Force Survey," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-25, December.
    12. Marie T. Mora & Alberto Dávila & James Boudreau, 2016. "Social networks and Black–White differentials in public employment agency usage among mature job seekers," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(2), pages 433-448, March.
    13. repec:eee:joecag:v:6:y:2015:i:c:p:102-112 is not listed on IDEAS
    14. Krause, Annabelle, 2013. "Don’t worry, be happy? Happiness and reemployment," Journal of Economic Behavior & Organization, Elsevier, vol. 96(C), pages 1-20.
    15. repec:zbw:rwirep:0312 is not listed on IDEAS
    16. Ronald Bachmann & Daniel Baumgarten, 2012. "How Do the Unemployed Search for a Job? – Evidence from the EU Labour Force Survey," Ruhr Economic Papers 0312, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

    More about this item

    Keywords

    job search behavior; unemployment; social networks;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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