A Matching Model on the Use of Immigrant Social Networks and Referral Hiring
Using a simple search model, with urn-ball derived matching function, this paper investigates the effect of firm ownerâ€™s and coworkersâ€™ nativity on hiring patterns and wages. In the model, social networks reduce search frictions and wages are derived endogenously as a function of the efficiency of the social ties of current employees. As a result, individuals with more efficient connections tend to receive higher wages and lower unemployment rate. However, because this efficiency depends on matching with same-type owners and coworkers, there is also a differential effect among workersâ€™ wages in the same firm. This analysis highlights the potential importance of social connections and social capital for understanding employment opportunities and wage differentials between these groups.
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