Immigration, Social Networks and Occupational Mismatch

49 Pages Posted: 10 Apr 2019 Last revised: 4 Mar 2021

See all articles by Sevak Alaverdyan

Sevak Alaverdyan

Bielefeld University - Department of Business Administration and Economics

Anna Zaharieva

Bielefeld University - Department of Business Administration and Economics

Date Written: März 26, 2019

Abstract

In this study we investigate the link between the job search channels that workers use to find employment and the probability of occupational mismatch in the new job. Our specific focus in on differences beween native and immigrant workers. We use data from the German Socio-Economic Panel (SOEP) over the period 2000 - 2014. First, we document that referral hiring via social networks is the most frequent single channel of generating jobs in Germany, in relative terms referrals are used more frequently by immigrant workers compared to natives. Second, our data reveals that referral hiring is associated with the highest rate of occupational mismatch among all channels in Germany. We combine these findings and use them to develop a theoretical search and matching model with two ethnic groups of workers (natives and immigrants), two search channels (formal and referral hiring) and two occupations. When modeling social networks we take into account ethnic and professional homophily in the link formation. Our model predicts that immigrant workers face stronger risk of unemployment and often rely on recommendations from their friends and relatives as a channel of last resort. Furthermore, higher rates of referral hiring produce more frequent occupational mismatch of the immigrant population compared to natives. We test this prediction empirically and confirm that more intensive network hiring contributes significantly to higher rates of occupational mismatch among immigrants. Finally, we document that the gaps in the incidence of referrals and mismatch rates are reduced among second generation immigrants indicating some degree of integration in the German labour market.

Keywords: job search, referrals, social networks, occupational mismatch, immigration

JEL Classification: J23, J31, J38; J64

Suggested Citation

Alaverdyan, Sevak and Zaharieva, Anna, Immigration, Social Networks and Occupational Mismatch (März 26, 2019). Bielefeld Working Papers in Economics and Management No. 4-2019, Available at SSRN: https://ssrn.com/abstract=3369643 or http://dx.doi.org/10.2139/ssrn.3369643

Sevak Alaverdyan (Contact Author)

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

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

Anna Zaharieva

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

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

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