Hiring through referrals

Galenianos, Manolis

doi:10.1016/j.jet.2014.03.009

Cited by 63 publications

(12 citation statements)

References 26 publications

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“…This creates a lemons effect on the labor market because firms use referrals only if the referring workers are highly skilled. Similar results are obtained by Galenianos (). If productivity differed sufficiently across workers in my setup, firms would only rehire the more skilled workers, generating a labor market outcome similar to the one delivered by the lemons effect.…”

Section: Introductionsupporting

confidence: 91%

Labor Market Equilibrium With Rehiring

Fernández-Blanco¹

2013

Int Economic Review

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Consistent with the empirical evidence, this article analyzes a labor market in which separations are not permanent and reactivated firms prefer to rehire former employees instead of seek new ones. Workers engage in job search due to the uncertain prospects of rehiring. If firms can commit to wages contingent on rehiring, they backload wages to provide incentives for workers to reduce their unobservable search effort. Under risk aversion and incomplete markets, if productivity at reactivation is sufficiently high, the tension between wage backloading and consumption smoothing leads to excessive search in equilibrium.

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Section: Introductionsupporting

confidence: 91%

Labor Market Equilibrium With Rehiring

Fernández-Blanco¹

2013

Int Economic Review

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“…As a result, firms relying on referrals find it cheaper to elicit effort by paying efficiency wages than firms using formal hiring methods. Galenianos () extends the original idea of Montgomery () and shows a positive link between the intensity of referrals and the job‐finding rate. Other studies investigating the link between referrals and the job‐finding rate are Calvo‐Armengol and Jackson (, ) and Fontaine (, , ).…”

Section: Introductionmentioning

confidence: 75%

“…Recent theoretical studies emphasizing the positive effect of referrals on wages include Kugler () and Galenianos (). Specifically, Kugler () finds that the benefit of using referrals for firms is that they lower monitoring costs, because workers can exert peer pressure on coworkers.…”

Section: Introductionmentioning

confidence: 99%

Optimal policy and the role of social contacts in a search model with heterogeneous workers

Stupnytska

Zaharieva

2017

J Public Economic Theory

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This paper develops a search model with heterogeneous workers and social networks. High ability workers are more productive and have a larger number of professional contacts. Firms have a choice between a high cost vacancy in the regular labour market and a low cost job opening in the referral market. In this setting the model predicts that a larger number of social contacts is associated with a larger wage gap between high and low ability workers and a larger difference in the equilibrium unemployment rates. Next we demonstrate that the decentralized equilibrium is inefficient for any value of the bargaining power. There are two reasons for the inefficiency. First, the private gain from creating a job in the referral market is always below the social gain, so the equilibrium unemployment of high ability workers is above its optimal value. Moreover, high ability workers congest the market for low ability workers, so the equilibrium wage inequality is inefficiently large. This is in contrast to the result of Blazquez and Jansen (2008) showing that the distribution of wages is compressed in a search model with heterogeneous workers. Finally, we show that a combination of taxes and subsidies can restore the optimal allocation.

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“…Montgomery () and, more recently, Galenianos (2014), study another role of job contact networks: to transmit information about the quality of workers. We abstract from the effects that connections may have in alleviating asymmetric information between firms and workers and focus on the role of connections in spreading information about job opportunities.…”

Section: Introductionmentioning

confidence: 99%

Endogenous Job Contact Networks

Galeotti

Merlino

2014

International Economic Review

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International audienceWe develop a model where workers, anticipating the risk of becoming unemployed, invest in connections in order to access information about available jobs that other workers may have. The investment in connections is high when the job separation rate in the labor market is moderate, whereas it is low for either low or high levels of job separation rate. The equilibrium response of network investment to changes in the labor market conditions generates novel empirical predictions. In particular, the probability that a worker finds a new job via his connections increases in the separation rate when the separation rate is low, whereas it decreases when the separation rate is high. These predictions are supported by the empirical patterns that we document for the U.K. labor market

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Hiring through referrals

Cited by 63 publications

References 26 publications

Labor Market Equilibrium With Rehiring

Labor Market Equilibrium With Rehiring

Optimal policy and the role of social contacts in a search model with heterogeneous workers

Endogenous Job Contact Networks

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