We analyze how the formal recognition of foreign qualifications affects immigrants’ labor market outcomes. The empirical analysis is based on a novel German data set that links respondents’ survey information to their administrative records, allowing us to observe immigrants at monthly intervals before, during, and after their application for occupational recognition. We find that 3 years after obtaining recognition, immigrants earn 19.8% higher wages and are 24.5 percentage points more likely to be employed than immigrants in the control group. We further document that occupational recognition leads to full convergence of immigrants’ earnings to those of their native counterparts.

This article derives novel testable implications of referral-based job search networks in which employees provide employers with information about potential new hires that they otherwise would not have. Using comprehensive matched employer–employee data covering the entire workforce in one large metropolitan labour market combined with unique survey data linked to administrative records, we provide evidence that workers earn higher wages and are less inclined to leave their firms if they have obtained their job through a referral. These effects are particularly strong at the beginning of the employment relationship and decline with tenure in the firm, suggesting that firms and workers learn about workers' productivity over time. Overall, our findings imply that job search networks help to reduce informational deficiencies in the labour market and lead to productivity gains for workers and firms.