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The Role of Referrals in Immobility, Inequality, and Inefficiency in Labor Markets

Year: 2024

Type: article

Abstract: We study the consequences of job markets’ heavy reliance on referrals. Referrals lead to more opportunities for workers to be hired, which lead to better matches and increased productivity but also disadvantage job seekers with few or no connections to employed workers, increasing inequality. Coupled with homophily, referrals also lead to immobility. We identify conditions under which distributing referrals more evenly reduces inequality and improves future productivity and mobility. We use the model to examine the short- and long-run welfare impacts of policies such as affirmative action and algorithmic fairness.

Source: Journal of Labor Economics

DOI: 10.1086/733048

Authors: Lukas Bolte, Nicole Immorlica, Matthew O. Jackson

Institutions: Tilburg University, Stanford University, Yale University, Santa Fe Institute

Language: English

Topic: Labor market dynamics and wage inequality

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Reduced inequalities, Decent work and economic growth, No poverty

Open Access status: green

OpenAlex ID: W3123399491

FWCI: 1.418

Cites: 43

Cited by: 8

Related to: 10