Explaining U-shape of the Referral Hiring Pattern in a Search Model with Heterogeneous Workers

Posted: 8 Nov 2015

See all articles by Anna Zaharieva

Anna Zaharieva

Bielefeld University - Department of Business Administration and Economics

Yuliia Stupnytska

Bielefeld University - Department of Business Administration and Economics

Date Written: November 2015

Abstract

This paper presents a search model with heterogeneous workers, social networks and endogenous search intensity. There are three job search channels: costly formal applications and two costless informal channels – through family and professional networks. Our model explains a U-shape referral hiring pattern observed in empirical studies and a strong selection of workers on productivity across the three channels. Moreover, combining family and professional referrals into one informal channel may generate a spurious result of wage premiums (penalties) if high (low) productivity workers are dominating in the empirical data and their productivity is not fully observable to the econometrician.

Keywords: Family contacts; Professional networks; U-shape; Referral puzzle; Wage premiums; Wage penalties

JEL Classification: J23; J31; J38; J64

Suggested Citation

Zaharieva, Anna and Stupnytska, Yuliia, Explaining U-shape of the Referral Hiring Pattern in a Search Model with Heterogeneous Workers (November 2015). Journal of Economic Behavior and Organization, Vol. 119, No. November, 2015, Available at SSRN: https://ssrn.com/abstract=2687408

Anna Zaharieva (Contact Author)

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany

Yuliia Stupnytska

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany

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