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Job Referral Networks and the Determination of Earnings in Local Labor Markets

  • Ian M. Schmutte

    (University of Georgia)

Referral networks affect the efficiency and equity of labor market outcomes, but few studies have been able to identify earnings effects empirically. To make progress, I build a model of on-the-job search in which referral networks channel information about high-paying jobs. I evaluate the model using geographically detailed employer-employee matched data for the U.S. The referral effect is identified by variations in the quality of local referral networks within narrowly defined neighborhoods. I find, consistent with the model, a positive and significant role for local referral networks on the full distribution of earnings outcomes from job search.

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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 536.

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Date of creation: 2011
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Handle: RePEc:red:sed011:536
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