On the Efficiency of Job Search with Social Networks

Pierre Cahuc and Francois Fontaine

No 3511, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This Paper provides a simple matching model in which unemployed workers and employers can be matched together through social networks and through more efficient, but also more costly, methods. In this framework, decentralized decisions to utilize social networks in the job search process can be inefficient and give rise to multiple equilibria for some parameters' values. More precisely, in a decentralized equilibrium, social networks can be over-utilized with respect to an efficient allocation in some circumstances, and under-utilized in others. Moreover, the existence of different job search methods can give rise to a higher job search intensity than the efficient one. This is in sharp contrast with the standard result, derived in matching models, according to which search intensity is always too low if not efficient. Eventually, in the presence of different job search methods, conditional unemployment benefit hikes can improve welfare when individuals are risk neutral.

Keywords: Social Networks; Unemployment; Job search (search for similar items in EconPapers)
JEL-codes: E24 J64 J68 (search for similar items in EconPapers)
Date: 2002-08
New Economics Papers: this item is included in nep-dge, nep-net and nep-ure
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Citations: View citations in EconPapers (18)

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Related works:
Journal Article: On the Efficiency of Job Search with Social Networks (2009)
Working Paper: On the efficiency of job search with social network (2009)
Working Paper: On the Efficiency of Job Search with Social Networks (2002)
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