Full Citation
Title: Job referrals and labor market outcomes: It's not who you know, it's how you know them
Citation Type: Working Paper
Publication Year: 2021
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Abstract: Though referrals are ubiquitous in the hiring process, it remains unclear exactly what they do. We exploit a novel data set to shed light on this question. Importantly, the data enables us to distinguish between different types of referrals-namely, those from family and friends and those from business contacts-and different types of jobs, as measured by the skill requirements of the occupation. Using these distinctions, we document clear patterns with respect to the frequency with which different types of referrals are used by workers in different occupations and subsequent labor market outcomes. Then we develop a structural framework to interpret our empirical findings and quantify the effects of social and business networks on employment rates, earnings, and job turnover across workers with different skills. For example, we find that referrals from family and friends contribute up to 20% of earnings for a subset of workers who struggle to generate offers through more traditional channels, and hence this type of referral is an important force for reducing earnings inequality. Referrals from business contacts, in contrast, have a more muted impact on earnings, as such referrals are most commonly used by workers who generate offers from other sources more readily.
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Authors: Rivers, David A; Lester, Benjamin; Topa, Giorgio
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Institution: Federal Reserve Bank of Philadelphia
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Publisher Location: Philadelphia, PA
Data Collections: IPUMS USA
Topics: Labor Force and Occupational Structure
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