Social Networks and Unraveling in Labor Markets

Itay Fainmesser ()

No 2010-15, Working Papers from Brown University, Department of Economics

Abstract: This paper studies the phenomenon of early hiring in entry-level labor markets (e.g. the market for gastroenterology fellowships and the market for judicial clerks) in the presence of social networks. We o§er a two-stage model in which workers in training institutions reveal information on their own ability over time. In the early stage, workers receive a noisy signal about their own ability. The early information is ?soft?and non-veri?able, and workers can convey the information credibly only to ? rms that are connected to them (potentially via their mentors). At the second stage, ? hard? veri?able (and accurate) information is revealed to the workers and can be credibly transmitted to all ?rms. We characterize the e§ects of changes to the network structure on the unraveling of the market towards early hiring. Moreover, we show that an e¢ cient design of the matching procedure can prevent unraveling.

Keywords: Networks; market design; unraveling; entry-level labor markets; early hiring (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-cta and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Journal Article: Social networks and unraveling in labor markets (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bro:econwp:2010-15

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