Information channels in labor markets: On the resilience of referral hiring

Alessandra Casella and Nobuyuki Hanaki

Journal of Economic Behavior & Organization, 2008, vol. 66, issue 3-4, 492-513

Abstract: Economists and sociologists disagree over markets' potential to substitute for personal connections. We study a model of labor markets where social ties are stronger between similar individuals, and firms prefer to rely on personal referrals than to hire on the open market. Workers in the market can take a costly action that can signal their productivity. The paper asks whether signaling reduces the reliance on the network. We find that the network is remarkably resilient. Signaling is caught in two contradictory requirements: to be informative it must be expensive, but if it expensive it can be undercut by the network.

Date: 2008
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Related works:
Working Paper: Information Channels in Labour Markets. On the Resilience of Referral Hiring (2005)
Working Paper: Information Channels in Labor Markets. On the Resilience of Referral Hiring (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:66:y:2008:i:3-4:p:492-513

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