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Network Search: Climbing the Job Ladder Faster

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  • Marcelo Arbex

    (University of Windsor)

  • David Wiczer

    (Stony Brook University)

  • Dennis O'Dea

    (University of Washington)

Abstract

We introduce an irregular network structure into a model of frictional, on-the-job search in which workers find jobs through their network connections or directly from firms. We show that jobs found through network search have wages that stochastically dominate those found through direct contact. In irregular networks, heterogeneity in the worker's position within the network leads to heterogeneity in wage and employment dynamics: better-connected workers climb the job ladder faster. Despite this rich heterogeneity from the network structure, the mean-field approach allows the problem of our workers to be formulated tractably and recursively. We then calibrate a quantitative version of our mechanism, showing it is consistent with several empirical findings regarding networks and labor markets: jobs found through networks have higher wages and last longer. Finally, we present new evidence consistent with our model that job-to-job switches at higher rungs of the ladder are more likely to use networks.

Suggested Citation

  • Marcelo Arbex & David Wiczer & Dennis O'Dea, 2018. "Network Search: Climbing the Job Ladder Faster," 2018 Meeting Papers 1195, Society for Economic Dynamics.
  • Handle: RePEc:red:sed018:1195
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    References listed on IDEAS

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    Cited by:

    1. R. Jason Faberman & Andreas I. Mueller & Ayşegül Şahin & Giorgio Topa, 2022. "Job Search Behavior Among the Employed and Non‐Employed," Econometrica, Econometric Society, vol. 90(4), pages 1743-1779, July.
    2. Neugart, Michael & Zaharieva, Anna, 2018. "Social Networks, Promotions, and the Glass-Ceiling Effect," Center for Mathematical Economics Working Papers 601, Center for Mathematical Economics, Bielefeld University.
    3. Bradley, Jake, 2022. "Worker-Firm Screening and the Business Cycle," IZA Discussion Papers 15017, Institute of Labor Economics (IZA).
    4. Lukas Bolte & Nicole Immorlica & Matthew O. Jackson, 2020. "The Role of Referrals in Immobility, Inequality, and Inefficiency in Labor Markets," Papers 2012.15753, arXiv.org.
    5. Martina Rebien & Michael Stops & Anna Zaharieva, 2020. "Formal Search And Referrals From A Firm'S Perspective," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(4), pages 1679-1748, November.
    6. André, Keven R.A. & Arbex, Marcelo & Corrêa, Márcio V., 2023. "The economic implications of a network SIR-Macro model of epidemics," Economics Letters, Elsevier, vol. 225(C).
    7. Benjamin Lester & David A. Rivers & Giorgio Topa, 2021. "The Heterogeneous Impact of Referrals on Labor Market Outcomes," Working Papers 21-34, Federal Reserve Bank of Philadelphia.
    8. Jake Bradley, 2020. "Worker-firm screening and the business cycle," Discussion Papers 2020/11, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    9. Moon, Ji-Woong, 2023. "Strategic referrals and on-the-job search equilibrium," Journal of Monetary Economics, Elsevier, vol. 134(C), pages 135-151.
    10. Forsythe, Eliza & Wu, Jhih-Chian, 2021. "Explaining Demographic Heterogeneity in Cyclical Unemployment," Labour Economics, Elsevier, vol. 69(C).

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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • 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
    • 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

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