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Informal search, bad search?: the effects of job search method on wages among rural migrants in urban China

Yuanyuan Chen, Le Wang () and Min Zhang ()
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Yuanyuan Chen: Shanghai University of Finance and Economics, Key Laboratory of Mathematical Economics (SUFE), Ministry of Education
Le Wang: University of Oklahoma
Min Zhang: East China Normal University

Journal of Population Economics, 2018, vol. 31, issue 3, No 6, 837-876

Abstract: Abstract The use of informal job search method is prevalent in many countries. There is, however, no consensus in the literature on whether it actually matters for wages, and if it does, what are the underlying mechanisms. We empirically examine these issues specifically for rural migrants in urban China, a country where one of the largest domestic migration in human history has occurred over the past decades. We find that there exists a significant wage penalty for those migrant workers who have conducted their search through informal channels, despite their popularity. Our further analysis suggests two potential reasons for the wage penalty: (1) the informal job search sends a negative signal (of workers’ inability to successfully find a job in a competitive market) to potential employers, resulting in lower wages, and (2) there exists a trade-off between wages and search efficiency for quicker entry into local labor market. We also find some evidence that the informal job search may lead to low-skilled jobs with lower wages. We do not find strong evidence supporting alternative explanations.

Keywords: Social network; Rural-urban migrants; Wage; Search friction; Information asymmetry; Chinese economy (search for similar items in EconPapers)
JEL-codes: J31 J64 P2 P5 (search for similar items in EconPapers)
Date: 2018
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