Who Gets the Job Referral? Evidence from a Social Networks Experiment

Abstract

We use recruitment into a laboratory experiment in Kolkata, India to analyze how job networks select individuals for employment opportunities. We present evidence that individuals face a tradeoff between choosing the most qualified individual for the job and the individual who is ideal from the perspective of their social network. The experiment allows randomly selected subjects to refer members of their social networks to subsequent rounds of the experiment and varies the incentive schemes offered to these participants. We find that when faced with performance pay, individuals are more likely to refer co-workers and less likely to refer family members. High ability participants who are offered performance pay recruit referrals who perform significantly better on a cognitive ability task and also prove to be more reliable as evidenced by their choices in the trust game and performance on an effort task.

Strength matters: Tie strength as a causal driver of networks’ information benefits

“…Along the second factor, we manipulated whether or not the referrer's firm pays a referral bonus. As suggested by Beaman and Magruder (2012) in their field experiment, cash bonuses likely affect actors' referring behavior. Participants in one set of conditions were not told anything about a bonus; participants in the other set of conditions were told that their firm was offering $1,000 for referring a successful hire.…”

Social Networks, Employee Selection, and Labor Market Outcomes

“…One particularly relevant result which emerges in the Casella and Hanaki formulation is that workers hired through referrals can forgo the step of obtaining formal productivity signals, which implies that referrals and education are substitutes. Beaman and Magruder (2012) which replaces…”

“…In a large-scale survey in Sweden, over 60 percent of the surveyed firms stated to have used informal channels when filling the last vacancy as opposed to 38 percent using the public employment office and 26 percent using classified ads (Ekström, 2001). 2 Other papers in this strain include Simon and Warner (1992), Casella and Hanaki (2006), Casella and Hanaki (2008), Dustmann et al (2011), Beaman and Magruder (2012) and Brown et al (2012); see section 2 below for a further discussion.…”

“…To further substantiate the validity 3 An extensive literature building on Rees (1966) and Granovetter (1973) however suggests that social contacts are important in the job search process (see Ioannides and Loury (2004) for a survey). More recent work include Aslund et al (2013), Bayer et al (2008), Beaman and Magruder (2012), Bentolila et al (2010), Brown et al (2012), Cingano and Rosolia (2012), Dustmann et al (2011), Galenianos (2011, Kramarz and Skans, Kramarz and Thesmar (2006), see section 2 for a detailed discussion regarding results therein. It is also well documented that inbreeding (or "'homophily"') is a fundamental phenomenon of social networks (McPherson et al, 2001;Currarini et al, 2009).…”

Improve Your Social Network and Have the Advantage in the Employment Seeking Process

“…The search for talents is difficult and the number of suitable candidates decreasing. This support the human resources management and for this department it is very important to know how and why individuals use social networks (Beaman, Magruder, 2012;Fernandez, castilla, 2001). Those companies can support their employees to improve and increase their networks.…”