On the Efficiency of Job Search with Social Networks

Pierre Cahuc and Francois Fontaine

No 583, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 benefits hikes can improve welfare when individuals are risk neutral.

Keywords: unemployment; social networks; job search (search for similar items in EconPapers)
JEL-codes: E24 J64 J68 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2002-09
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Citations: View citations in EconPapers (21)

Published - published in: Journal of Public Economic Theory, 2009, 11 (3), 411–439

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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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