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Endogenous job contact networks

  • Galeotti, Andrea
  • Merlino, Luca Paolo

We develop a model where workers, anticipating the possibility of unemployment, invest in connections to access information about available jobs. The investment in connections is high when the job separation rate is moderate, otherwise the investment in connections is low. The response of network investment to labor market conditions generates novel predictions. In particular, the probability that a worker finds a new job via his connections increases in the separation rate, when the separation rate is low, and it decreases otherwise. These predictions are supported by the empirical patterns which we document for the UK labor market.

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Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2010-14.

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Date of creation: 04 May 2010
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Publication status: published
Handle: RePEc:ese:iserwp:2010-14
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