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Title: The Impact of Referral-Networks on Sectoral Reallocation: Job Search Asymmetries and the Network Wedge

Citation Type: Working Paper

Publication Year: 2023

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Abstract: We investigate the impact of job-search referral-networks on labor allocation across sectors. Using data from the Current Population Survey (CPS), the Panel Survey of Income Dynamics (PSID), and the National Longitudinal Survey of Youth 1997 (NLSY97), we estimate workers using referral-networks to find jobs are 1.2 - 4 percentage points less likely to switch industries. These results suggest job-search networks are fairly industry-specific and can create a “network wedge” in labor allocation across industries. Combining these results with CPS data of the intensity of referral use over time, we estimate 10%-20% of the observed long-run decline in sectoral switching could be attributable to increased prevalence of referral-networks. We then construct and calibrate a 2-sector search-and-matching model with sector-specific referralnetworks. Counterfactuals suggest reducing referral-network inequality across sectors is welfare improving despite appearing to distort labor allocation across industries. These findings have significant implications for worker retraining programs.

Url: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4591003

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Authors: Raymond, Benjamin

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Publication Number: 4591003

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Pages: 1-39

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Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure

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