Job Search Channels, Neighborhood Effects, and Wages Inequality in Developing Countries: The Colombian Case

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu This paper analyses the relationship between social networks and the job search behaviour of individuals. Networking is not only based on friends and relatives but also on neighbourhood. The geographic closeness is associated to social interactions. Individuals who are in physical and social proximity share the same sources of information, because they divide individual characteristics or because they learn from one another's behaviour. Using data from Colombia in 2009 we explore how neighbourhoods have an effect on the channel used to search for a job (formal vs informal). People tend to opt for a formal or informal channel depending on the channel selected by employed people in their neighbourhood. In addition, we study the wage premium in using a formal or informal channel, exploring the inequality that can arise using a different job search method. Our results show that the neighbourhood affects the individual's job search method and referral workers earn less wage at the bottom of the wage distribution with respect to non-referred workers. At the top of the wage distribution the difference observed is due to different characteristics between the two groups. Colombia presents persistent high levels of informality and inequality. These features impose important social and economic costs such as low tax collection, low employee protection and deficiencies in the labour intermediation process with strong informational asymmetries in the job search. New policies to regulate the labour market are need. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SJEL Classification: J64, J31, J24, P23, J6, J7

Agglomeration economies in the presence of an informal sector: the Colombian case

“…Each department is composed of municipalities, among which there is a capital city of the department. In total, Colombia has 1,119 municipalities (a more detailed characterization of Colombia can be found inRoyuela and García (2015) andNicodemo and García (2015)). 7 Departments and municipalities are grouped into very broad regions according to their economic, demographic and social conditions as well as their location.…”

Social capital and job search assistance: A multilevel analysis of East Asian countries

“…Whether or not an individual has a personal interest in discussing and solving community problems, being embedded in the right location confers this advantage of receiving tips and endorsement in finding a job. Prior research found that living in an area with a higher proportion of employed people can lead to greater probability of securing employment through a personal contact, as neighbors tend to interact with one another and exchange, among others, job information (Nicodemo and Garcia, 2015; Patacchini and Zenou, 2012; Topa, 2001). In a related vein, it can be said that living with more community-oriented people, who may be more prone to converse/commingle with their neighbors, can translate into information diffusion about job opportunities that otherwise may not be available to the recipients (jobseekers).…”

“…Regretfully, evidence is scarce beyond the context of ethnic communities in traditional immigrant destinations such as Europe and North America. As a result, whether such contextual effect (Nicodemo and Garcia, 2015) can be applied to general populations in other geographic (East Asian) settings remains an open question.…”

“…The present study adds to the scholarship by tackling the above question through systematic data analysis, one that ‘has rarely been studied directly’ (McDonald et al, 2009: 387). Also in limited supply is comparative evidence, as the extant findings almost exclusively derive from single-case studies on Western countries (McDonald et al, 2012; Nicodemo and Garcia, 2015). This article bridges the gap by using a population-based, cross-national survey conducted in East Asia.…”

Social networks, role models, peer effects, and aspirations

“…Evidence from developed countries highlights that around 50 per cent of jobs are found through networks of family and friends (Ioannides and Datcher 2004). Rates in developing countries are similar, if not higher: 40-85 per cent of job searchers find their job through family and friends (for Ethiopia, see Caria et al (2018); Serneels (2007); for India, see Beaman and Magruder (2012); for Colombia, see Nicodemo and García (2015); and for the Middle East, see Gatti et al (2014)) Economists have long modelled social networks as facilitating job opportunities through a reduction in search costs (Calvo-Armengol and Jackson 2004;Topa 2001). This channel is likely to be even more important in developing countries, where information frictions are larger (Wahba and Zenou 2005).…”