Job matching, social network and word-of-mouth communication |
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Authors: | Antoni Calv-Armengol Yves Zenou |
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Institution: | aICREA and Universitat Autònoma de Barcelona, Department of Economics and Economic History, Edifici B, 08193 Bellaterra (Barcelona), Spain;bIUI and GAINS, Université du Maine |
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Abstract: | Workers can find a job either directly or through personal contacts. From this micro scenario, we derive an aggregate matching function that has the standard properties but fails to be homogeneous of degree one. We show that, when the network size increases, on average, the unemployed workers hear about more vacancies through their social network. However, above a certain critical value, job matches decrease with network size. We then establish existence and uniqueness of the labor market equilibrium and study its properties. Finally, we demonstrate that the decentralized market equilibrium is not efficient because of both search and network externalities. |
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Keywords: | Coordination failures Social network Personal communication |
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