What Do Networks Do? The Effect of Social Contacts on Job Quality within the Search Process

• In Event: 247 - Regular Session. Social Capital and Social Outcomes

Abstract

Research on the effect of social networks on job search outcomes has provided mixed results. Some studies found that the use of social contacts has positive effects on wages and on job quality while some others found negative effects. Previous studies however suffered from several methodological limitations such as selecting on the dependent variable or ignoring unobserved heterogeneity. In this paper, we develop a novel empirical approach to study job search by shifting the attention from search outcomes to the search process itself. Specifically, we investigate the effect of using social ties on the quality of the jobs to which job seekers apply. Using within-person fixed effects models, we show that when the job seeker uses social contacts, she applies to the jobs that require less education and pay less than the jobs to which she applies through formal methods. The results hold important implications for our understanding of the job search process and the role of social contacts within this process.

Authors

• Gokce Basbug, Massachusetts Institute of Technology

• Ofer Sharone, Massachusetts Institute of Technology