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On-the-Job Search and Finding a Good Job Through Social Contacts

Publication ,  Journal Article
Horvath, G
Published in: The B.E. Journal of Theoretical Economics
January 1, 2014

The interactions between on-the-job search and finding a job through social contacts are investigated in a Diamond–Mortensen–Pissarides search model with heterogeneous wages. Workers may find a job through their social contacts and on the formal market. The presence of social contacts increases the overall welfare in society as it rises the number of workers earning high wages and decreases the unemployment rate. However, unemployed workers finding a job through social ties earn lower wages on average than those who obtain a job on the formal market. This result follows from on-the-job search: employed workers pass only those offers on to their neighbors that pay (weakly) lower wages than their current wages earned. Despite the wage discount, unemployed workers still might find it beneficial to search via social ties because arrival rate of offers is higher for this channel than for the formal market when the number of neighbors is sufficiently large. There is a trade-off between unemployment duration and wages earned for workers obtaining a job via social ties.

Duke Scholars

Published In

The B.E. Journal of Theoretical Economics

DOI

EISSN

1935-1704

ISSN

2194-6124

Publication Date

January 1, 2014

Volume

14

Issue

1

Start / End Page

93 / 125

Publisher

Walter de Gruyter GmbH

Related Subject Headings

  • Economic Theory
  • 1401 Economic Theory
 

Citation

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Horvath, G. (2014). On-the-Job Search and Finding a Good Job Through Social Contacts. The B.E. Journal of Theoretical Economics, 14(1), 93–125. https://doi.org/10.1515/bejte-2013-0033
Horvath, Gergely. “On-the-Job Search and Finding a Good Job Through Social Contacts.” The B.E. Journal of Theoretical Economics 14, no. 1 (January 1, 2014): 93–125. https://doi.org/10.1515/bejte-2013-0033.
Horvath G. On-the-Job Search and Finding a Good Job Through Social Contacts. The BE Journal of Theoretical Economics. 2014 Jan 1;14(1):93–125.
Horvath, Gergely. “On-the-Job Search and Finding a Good Job Through Social Contacts.” The B.E. Journal of Theoretical Economics, vol. 14, no. 1, Walter de Gruyter GmbH, Jan. 2014, pp. 93–125. Crossref, doi:10.1515/bejte-2013-0033.
Horvath G. On-the-Job Search and Finding a Good Job Through Social Contacts. The BE Journal of Theoretical Economics. Walter de Gruyter GmbH; 2014 Jan 1;14(1):93–125.
Journal cover image

Published In

The B.E. Journal of Theoretical Economics

DOI

EISSN

1935-1704

ISSN

2194-6124

Publication Date

January 1, 2014

Volume

14

Issue

1

Start / End Page

93 / 125

Publisher

Walter de Gruyter GmbH

Related Subject Headings

  • Economic Theory
  • 1401 Economic Theory