[Journal:] IZA World of Labor [ISSN:] 2054-9571 [Year:] 2016 [Issue:] 304
Social networks, or “job-referral” networks, can help make labor markets become more efficient. Outside the firm, they help workers obtain employment after displacement and secure higher-paying jobs. They can also match highly-skilled workers to more productive employment. Inside the firm, referrals facilitate employment relationships that are more stable, productive, and profitable. In aggregate, referral networks help “grease the wheels” of a labor market that can be beset by a range of information problems. However, such networks can also be segmented along racial, ethnic, and socio-economic lines, which brings into question the effect they may have on inequality between and within different groups of workers.
referral networks wages unemployment inequality social interactions