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Job Referral Networks and the Determination of Earnings in Local Labor Markets

Ian M. Schmutte
Journal of Labor Economics 33 (2015), 1–33.

Resources:

Spatial autocorrelation function

Abstract
Despite their documented importance in the labor market, little is known about how workers use social networks to find jobs and their resulting effect on earnings. I use geographically detailed U.S. employer-employee data to infer the role of social networks in connecting workers to jobs in high-paying firms. To identify social interactions in job search, I exploit variation in social network quality within small neighborhoods. Workers are more likely to change jobs, and more likely to move to a higher-paying firm, when their neighbors are employed in high-paying firms. Furthermore, local referral networks help match high-ability workers to high-paying firms.