“…Bentolila et al, 2010). The degree of mismatch depends on the degree of homophily, which is the 1 Studies in which networks transmit information about the productivity of workers through referrals to current employers, or can inform workers and firms about the quality of the match, include Saloner (1985), Montgomery (1991), Simon and Warner 1992, Mortensen and Vishwanath, 1994, and more recently, Brown et al (2012, Dustmann et al (2011) andGalenianos (2014). Referrals can also mitigate moral hazard problems through co-worker monitoring, allowing firms to pay lower efficiency wages (Kugler, 2003;Dhillon et al, 2013). tendency of individuals to befriend others who are similar to themselves.…”