Friends' Networks and Job Finding Rates

34 Pages Posted: 15 Nov 2010

See all articles by Lorenzo Cappellari

Lorenzo Cappellari

Catholic University of the Sacred Heart of Milan; University of Essex - Institute for Social and Economic Research (ISER); Institute for the Study of Labor (IZA)

Konstantinos Tatsiramos

University of Luxembourg; Luxembourg Institute of Socio-Economic Research (LISER)

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Date Written: November 15, 2010

Abstract

We investigate the effect of social interactions on labor market outcomes using a direct measure of social contacts based on information about individuals’ three best friends and their characteristics. We examine the effect of the number of employed friends on the transition from non-employment to employment, and we find the existence of significant network effects at the individual level. An additional employed friend increases the probability of finding a job by 3.7 percentage points. This finding is robust to specifications that address the endogeneity of friends’ employment status, which may be induced by correlation with unobserved individual attributes and feedback effects. Considering labor market outcomes, we find evidence of higher wages and employment stability for those with more employed friends, which is consistent with networks acting as an information transmission mechanism.

Keywords: networks, unemployment, friendship ties

JEL Classification: J64

Suggested Citation

Cappellari, Lorenzo and Tatsiramos, Konstantinos, Friends' Networks and Job Finding Rates (November 15, 2010). CESifo Working Paper Series No. 3243, Available at SSRN: https://ssrn.com/abstract=1709278 or http://dx.doi.org/10.2139/ssrn.1709278

Lorenzo Cappellari (Contact Author)

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

University of Essex - Institute for Social and Economic Research (ISER)

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Konstantinos Tatsiramos

University of Luxembourg ( email )

L-1511 Luxembourg
Luxembourg

Luxembourg Institute of Socio-Economic Research (LISER) ( email )

11, Porte des Sciences
Campus Belval – Maison des Sciences Humaines
Esch-sur-Alzette, L-4366
Luxembourg

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