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Formal and informal job search

Author

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  • Luca Paolo Merlino

    () (ECARES - European Center for Advanced Research in Economics and Statistics - ULB - Université Libre de Bruxelles)

Abstract

I develop a model where workers decide how hard to look for a job via formal and informal search channels. The intensity of formal search determines an individual’s arrival rate of offers. The strength of investment in informal search translates into a job contact network in which job offers are transmitted. There are two equilibria, one with high formal search and one with high informal search. The former Pareto dominates the latter.

Suggested Citation

  • Luca Paolo Merlino, 2014. "Formal and informal job search," Post-Print hal-01263747, HAL.
  • Handle: RePEc:hal:journl:hal-01263747
    DOI: 10.1016/j.econlet.2014.10.008
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01263747
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    References listed on IDEAS

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    1. Battu, Harminder & Seaman, Paul & Zenou, Yves, 2011. "Job contact networks and the ethnic minorities," Labour Economics, Elsevier, vol. 18(1), pages 48-56, January.
    2. Calvo-Armengol, Antoni & Zenou, Yves, 2005. "Job matching, social network and word-of-mouth communication," Journal of Urban Economics, Elsevier, vol. 57(3), pages 500-522, May.
    3. Calvo-Armengol, Antoni, 2004. "Job contact networks," Journal of Economic Theory, Elsevier, vol. 115(1), pages 191-206, March.
    4. Galenianos, Manolis, 2014. "Hiring through referrals," Journal of Economic Theory, Elsevier, vol. 152(C), pages 304-323.
    5. Holzer, Harry J, 1987. "Informal Job Search and Black Youth Unemployment," American Economic Review, American Economic Association, vol. 77(3), pages 446-452, June.
    6. Cabrales, Antonio & Calvó-Armengol, Antoni & Zenou, Yves, 2011. "Social interactions and spillovers," Games and Economic Behavior, Elsevier, vol. 72(2), pages 339-360, June.
    7. Andrea Galeotti & Luca Paolo Merlino, 2014. "Endogenous Job Contact Networks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 1201-1226, November.
    8. Andrea Galeotti, 2010. "Talking, Searching, And Pricing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(4), pages 1159-1174, November.
    9. Andrea Galeotti & Sanjeev Goyal, 2010. "The Law of the Few," American Economic Review, American Economic Association, vol. 100(4), pages 1468-1492, September.
    10. Antoni Calvó-Armengol & Matthew O. Jackson, 2004. "The Effects of Social Networks on Employment and Inequality," American Economic Review, American Economic Association, vol. 94(3), pages 426-454, June.
    11. Blau, David M & Robins, Philip K, 1990. "Job Search Outcomes for the Employed and Unemployed," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 637-655, June.
    12. Fontaine, Francois, 2007. "A simple matching model with social networks," Economics Letters, Elsevier, vol. 94(3), pages 396-401, March.
    13. Yannis M. Ioannides & Linda Datcher Loury, 2004. "Job Information Networks, Neighborhood Effects, and Inequality," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1056-1093, December.
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    Cited by:

    1. repec:eee:ecolet:v:166:y:2018:i:c:p:45-49 is not listed on IDEAS
    2. Stupnytska, Yuliia & Zaharieva, Anna, 2015. "Explaining U-shape of the referral hiring pattern in a search model with heterogeneous workers," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 211-233.
    3. Arbex, Marcelo & Caetano, Sidney & O’Dea, Dennis, 2016. "The implications of labor market network for business cycles," Economics Letters, Elsevier, vol. 144(C), pages 37-40.

    More about this item

    Keywords

    Unemployment; Job search; Endogenous job contact networks;

    JEL classification:

    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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