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Do workers really benefit from their social networks?

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  • Francois Fontaine

    (University of Paris 1 - Eurequa - CNRS)

Abstract

This paper provides a simple matching model in which unemployed workers and employers in large firms can be matched together through social networks or through more "formal" methods of search. We show that networks do not necessarily add new externalities and that some results previously obtained in the literature are questionable. Nevertheless, social networks can, in some case, substitute for labor market and this crowding-out effect may be socially costly. We show that a policy increasing the number of workers embedded in the social networks can increase the unemployment rate and decrease workers welfare. Since it is mostly the firms which benefit from larger social networks, transfers from the firms to the workers are necessary to make larger access to the social networks efficient.

Suggested Citation

  • Francois Fontaine, 2003. "Do workers really benefit from their social networks?," Macroeconomics 0311002, University Library of Munich, Germany, revised 26 Aug 2004.
  • Handle: RePEc:wpa:wuwpma:0311002
    Note: Type of Document - pdf; prepared on Win2000; pages: 30; figures: Yes (included)
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Zaharieva, Anna, 2013. "Double Matching: Social Contacts in a Labour Market with On-the-Job Search," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79891, Verein für Socialpolitik / German Economic Association.
    2. Sabatini, Fabio, 2005. "Social capital, labour precariousness and the economic performance. An empirical assessment of the strength of weak ties in Italy," AICCON Working Papers 26-2005, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
    3. Zaharieva, Anna, 2013. "Social welfare and wage inequality in search equilibrium with personal contacts," Labour Economics, Elsevier, vol. 23(C), pages 107-121.
    4. Samuel Bentolila & Claudio Michelacci & Javier Suarez, 2010. "Social Contacts and Occupational Choice," Economica, London School of Economics and Political Science, vol. 77(305), pages 20-45, January.
    5. Trockel, Walter, 2014. "Robustness of intermediate agreements for the discrete Raiffa solution," Games and Economic Behavior, Elsevier, vol. 85(C), pages 32-36.
    6. Buhai, Sebastian & van der Leij, Marco, 2006. "A Social Network Analysis of Occupational Segregation," Working Papers 06-11, University of Aarhus, Aarhus School of Business, Department of Economics.
    7. Fontaine, François, 2008. "Why are similar workers paid differently? the role of social networks," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 3960-3977, December.
    8. Zaharieva, Anna, 2015. "Social contacts and referrals in a labor market with on-the-job search," Labour Economics, Elsevier, vol. 32(C), pages 27-43.
    9. LIU Yang, 2015. "The Role of Individual Social Capital in Wage Determination: Evidence from China," Discussion papers 15133, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    Keywords

    social networks; labor market; matching; unemployment; economic policy;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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