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Article
Publication date: 18 October 2011

Marco Caliendo, Ricarda Schmidl and Arne Uhlendorff

This paper aims to analyze the role of social networks on the job search choices of the unemployed. If social networks convey useful information in the job search process…

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Abstract

Purpose

This paper aims to analyze the role of social networks on the job search choices of the unemployed. If social networks convey useful information in the job search process, individuals with larger networks should experience a higher productivity of informal search channels. This in turn affects the choice of formal search intensity and the reservation wage. The paper seeks to test these search‐theoretic implications of productive social networks empirically.

Design/methodology/approach

The authors use the IZA Evaluation Dataset containing detailed information on job search behavior of recently unemployed individuals. Observing a rich array of personality traits and direct measures of the social network, the authors choose an identification approach based on observable characteristics using least squares and binary probit regression analysis.

Findings

The findings confirm theoretical expectations. Individuals with larger networks use informal search channels more often and shift from formal to informal search. In addition to that, evidence is found for a positive relationship between network size and reservation wages.

Research limitations/implications

The extent to which networks are used during job search most likely also depends on the quality of the network, which cannot be observed in the data. However, as the network significantly changes the observable formal job search effort of individuals, public job search monitoring policies should take these effects into account.

Originality/value

The paper complements the previous body of literature on the role of social networks in the labor market that predominantly focuses on labor market outcomes. By highlighting the interaction between networks and job search choices the paper improves the understanding of realized labor market outcomes in the presence of networks.

Details

International Journal of Manpower, vol. 32 no. 7
Type: Research Article
ISSN: 0143-7720

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