Labour Market Networks, Underclasses, and Inequality

Lisa Finneran; and Morgan Kelly

Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth

Abstract: About half of all vacancies are filled through networks of personal contact. We consider the implications of such labour market networks for inequality. Our central result is that referral networks display threshold behaviour. Above a critical density of referals, qualified workers at all levels of the network are recruited with probability one. Below the threshold, workers low in the hierachy are hired with probability zero: an underclass emerges. Although there is no discrimination, workers with the same distribution of ability at different layers of the network have very different average incomes, reflecting differences of social capital in the form of labour market contacts.

Keywords: labour market networks; underclasses; inequality (search for similar items in EconPapers)
JEL-codes: D62 D63 (search for similar items in EconPapers)
Pages: 23 pages
Date: 1996
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Related works:
Working Paper: Labour Market Networks, Underclass and Inequality (1996)
Working Paper: Labour Market Networks, Underclasses and Inequality (1996)
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