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Review of Economic Studies Vol. 83 No. 2 2016

Referral-based Job Search Networks

Christian Dustmann1,2,3; Albrecht Glitz4,5,6; Uta Schönberg7,8; Herbert Brücker

1 Institute for Fiscal Studies · 2 Centre for Economic Policy Research · 3 University College London · 4 National Institute of Statistics and Geography · 5 Universitat Pompeu Fabra · 6 Barcelona School of Economics · 7 IZA - Institute of Labor Economics · 8 University of Rochester

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Abstract

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.

DOI
10.1093/restud/rdv045
Volume
83
Issue
2
Pages
514-546
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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