Some Contacts Are More Equal than Others: Informal Networks, Job Tenure, and Wages

Loury, Linda Datcher

doi:10.1086/499974

Cited by 240 publications

(156 citation statements)

References 27 publications

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“…2 Previous empirical research on network effects in the labor market is based either on survey information on the use of informal search methods, such as friends and relatives, or on administrative records in which networks are defined indirectly using observable proxies, such as neighborhood, firm, or ethnicity. Studies on the use of informal search methods include Simon and Warner (1992), Pistaferri (1999), Marmaros and Sacerdote (2002), Loury (2006), Bentolila et al (2010) and Pellizzari (2010). 3 Studies defining networks indirectly using proxies include Topa (2001), Weinberg et al (2004), Bayer et al (2008), Hellerstein et al (2011) and Schmutte (2015), who use geographic proximity at the neighborhood level; Cingano and Rosolia (2012), who define networks at the firm level; Edin et al (2003), Munshi (2003) and Beaman (2012), who define networks based on immigrants' ethnic origin; and Dustmann et al (2011), who use information on both firms and ethnicity.…”

Section: Theoretical Framework and Related Literaturementioning

confidence: 99%

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With a little help from my friends? Quality of social networks, job finding and job match quality

Cappellari

Tatsiramos

2015

European Economic Review

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This paper studies the effect of network quality on job finding and job match quality using longitudinal data and a direct measure of network quality, which is based on the employment of friendship ties. Various identification strategies provide robust evidence that a higher number of employed contacts increases the job finding rate. Network quality also increases wages for highskilled workers forming networks with non-familial contacts. Instead, for low-skilled workers, more employed familial contacts lead to a negative but not significant effect on wages. These findings reconcile previous mixed evidence of network effects on wages, indicating heterogeneity by skill level and relationship type.

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Section: Theoretical Framework and Related Literaturementioning

confidence: 99%

“…Some studies find positive network effects on wages (e.g. Simon and Warner, 1992;Marmaros and Sacerdote, 2002;Loury, 2006), while others find negative effects (e.g. Pistaferri, 1999;Bentolila et al, 2010).…”

Section: Match Qualitymentioning

confidence: 99%

With a little help from my friends? Quality of social networks, job finding and job match quality

Cappellari

Tatsiramos

2015

European Economic Review

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“…In contrast to the early literature that highlights the beneficial effects of informal job search method, Loury (2006) highlights the negative role of social networks as low-wage-offer source of information. Specifically, he argues that some job seekers may yet to have contacts or access to formal sources that can provide external high-wage offers that exceed their reservation wages.…”

Section: Theories/hypotheses For Negative Relationshipsmentioning

confidence: 73%

“…To eliminate unobserved individual heterogeneity, Loury (2006) controls for an extensive list of individual characteristics, including Armed Forces Qualifying Test scores (a proxy for individual ability). Pellizzari (2010), on the other hand, uses fixed-effect panel data approaches to further control for all the time-invariant individual characteristics.…”

Section: Summary Of Existing Empirical Studiesmentioning

confidence: 99%

“…In a relatively noisy labor market like China, where employers have even more difficulties in observing a worker's ability and her job opportunities, such negative signal could lead employers to pay the worker lower wages, and hence the observed wage penalty. This is the signal of limited choice hypothesis proposed in Loury (2006). To test this theory, we exploit the implications of the signaling hypothesis -the signaling value may decrease or even disappear in the long run.…”

Section: Introductionmentioning

confidence: 97%

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Informal search, bad search?: the effects of job search method on wages among rural migrants in urban China

2017

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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. Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. what are the underlying mechanisms. We empirically examine these issues specifically for rural migrants in urban China, a country where one of the largest domestic migration in human history has occurred over the past decades. We find that there exists a significant wage penalty for those migrant workers who have conducted their search through informal channels, despite their popularity. Our further analysis suggests two potential reasons for the wage penalty: 1) the informal job search sends a negative signal (of workers' inability to successfully find a job in a competitive market) to potential employers, resulting in lower wages; and 2) there exists a trade-off between wages and search efficiency for quicker entry into local labor market. We also find some evidence that the informal job search may lead to low-skilled jobs with lower wages. We do not find strong evidence supporting alternative explanations. Terms of use: Documents in JEL

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Spatial Characteristics of Social Networks

2018

Cities as Spatial and Social Networks

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Some Contacts Are More Equal than Others: Informal Networks, Job Tenure, and Wages

Cited by 240 publications

References 27 publications

With a little help from my friends? Quality of social networks, job finding and job match quality

With a little help from my friends? Quality of social networks, job finding and job match quality

Informal search, bad search?: the effects of job search method on wages among rural migrants in urban China

Spatial Characteristics of Social Networks

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