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Social Contacts and Occupational Choice

Javier Suarez (), Samuel Bentolila () and Claudio Michelacci ()

No 593, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: Social contacts help workers to find jobs, but those jobs need not be in the occupations where workers are most productive. Hence social contacts can generate mismatch between a worker's occupational choice and his comparative productive advantage. Thus economies with dense social networks can exhibit apparently low labor force quality and, as a result, low returns to firms' investment and depressed aggregate productivity. We employ US and European data for the 1990's to test the key prediction that social contacts distort workers' occupational choices in a direction that reduces their apparent productivity. We find that the use of social contacts helps find jobs one to two months sooner but leads to individual wage discounts of 5\% to 7\% and produces negative externalities on aggregate productivity

Keywords: Search; Labour markets; social Mobility (search for similar items in EconPapers)
JEL-codes: J24 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-lab and nep-ure
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Journal Article: Social Contacts and Occupational Choice (2010) Downloads
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