TY  - THES
AB  - This dissertation studies the impact of social networks on social welfare and wage inequality
in a labour market with search and matching frictions. Social contacts are considered in the
sense of information transmission about vacancies from employed to unemployed workers (social
capital). The main chapters of this thesis are based on three independent articles. Chapters 2
and 3 are joint works with J.-Prof. Dr. Anna Zaharieva.
Chapter 2 is a revised version of the IMW working paper No. 491 with the same title.
This paper develops a search model with heterogeneous workers and social networks. High
ability workers are more productive and have a larger number of professional contacts. Firms
can choose between a high cost vacancy in the regular market and a low cost job opening in
the referral market. The model predicts that a larger number of social contacts is associated
with a larger wage gap between high and low ability workers and a larger difference in the
equilibrium unemployment rates. The net welfare gain of referrals is estimated at 1.2%. Next
we demonstrate that the decentralized equilibrium with referrals is inefficient for any value of the
bargaining power. There are two reasons for the inefficiency. First, the private gain from creating
a job in the referral market is always below the social gain, so the equilibrium unemployment of
high ability workers is above its optimum. Moreover, high ability workers congest the market for
low ability workers, so the equilibrium wage inequality is inefficiently large. This is in contrast
to the result of Blazquez and Jansen (2008) showing that the distribution of wages is compressed
in a search model with heterogeneous workers. Finally, we show that a combination of transfers
and subsidies can restore the optimal allocation. If this policy is implemented the net welfare
gain of referrals rises up to 1.8%.
Chapter 3 is a paper published in the Journal of Economic Behavior and Organization 119
(2015), pp. 211-233 (doi:10.1016/j.jebo.2015.08.012) with the same title. This paper presents
a search model with heterogeneous workers, social networks and endogenous search intensity.
There are three job search channels available to the unemployed: costly formal applications
and two costless informal channels - through family and professional networks. Low productivity
workers expect low wages implying low incentives for preparing formal job applications.
Hence low productivity workers rely on family referrals as a method of last resort. In contrast,
professional referrals are used by firms to hire high productivity employees. Formal hiring is
then a most frequent employment channel for workers in the middle range of the productivity
distribution. This 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.
Chapter 4 is the IMW working paper No. 548 with the same title. In this paper, the
search model is proposed, in which homogeneous firms are uncertain about the job seekers’
number of friends, who can help them in the job search (social capital). All workers have the
same productivity and differ only in the social capital. A firm offers a take-it-or-leave-it wage
contract to a worker after checking the worker’s profile and her public number of non-fictitious
social contacts in the Social Network System in the Internet. This number serves as a noisy
signal of the social capital for firms and cannot be influenced by the worker only for signalling
purpose. The model generates a positive relationship between the number of contacts in the
Social Network System and the wage offered by firms in the equilibrium. In addition, the
presence of firm’s uncertainty with respect to workers’ possibilities to find jobs through social
contacts increases overall social welfare.
DA  - 2016
LA  - eng
PY  - 2016
TI  - Social networks in a frictional labour market
UR  - https://nbn-resolving.org/urn:nbn:de:hbz:361-29022291
Y2  - 2024-11-22T07:33:48
ER  -