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FORMAL SEARCH AND REFERRALS FROM A FIRM'S PERSPECTIVE
Authors:Martina Rebien  Michael Stops  Anna Zaharieva
Institution:1. Office of Urban Research and Statistics for Nuremberg and Fuerth, Germany;2. Institute for Employment Research (IAB), Germany;3. University of Bielefeld, Germany

We are thankful for useful comments and advice to Ronald Bachmann, Herbert Dawid, Roberto Fernandez, Alexander Kubis, Christian Merkl, Michael Neugart, and conference participants at the annual meetings of the American Economic Association in Philadelphia, the European Association of Labour Economists in St. Gallen, the European Economic Association in Cologne, the German Economic Association in Vienna, the annual Search and Matching conference in Barcelona, the IAB conference on “Vacancies, Hiring and Matching” as well as seminar participants at the University of Bielefeld, the Center for Interdisciplinary Research (ZIF) in Bielefeld, Technical University of Darmstadt, the Institute for Employment Research (IAB), the Friedrich-Alexander-University Erlangen-Nuremberg, and the RWI - Leibniz Institute for Economic 4. Research.

Abstract:We explore the relationship between firms' characteristics and recruitment strategies. We present a theoretical search model with two search channels: a costly formal channel and a costless informal channel (referrals). We empirically test the model predictions and find that: larger firms search more formally; firms search more formally for high-skilled workers; the positive relationship between firm's size and formal search intensity also holds for firms not using referrals; firms using referrals invest less into formal search compared to firms not using referrals; larger firms hire less often by referrals than smaller firms; and larger search effort leads to more applicants.
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