Social Networks, Job Search Methods and Reservation Wages: Evidence for Germany

30 Pages Posted: 20 Sep 2010

See all articles by Marco Caliendo

Marco Caliendo

University of Potsdam; Institute for the Study of Labor (IZA)

Ricarda Schmidl

IZA Institute of Labor Economics

Arne Uhlendorff

IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2010

Abstract

In this paper we analyze the relationship between social networks and the job search behavior of unemployed individuals. It is believed that networks convey useful information in the job search process such that individuals with larger networks should experience a higher productivity of informal search. Hence, job search theory suggests that individuals with larger networks use informal search channels more often and substitute from formal to informal search. Due to the increase in search productivity, it is also likely that individuals set higher reservation wages. We analyze these relations using a novel data set of unemployed individuals in Germany containing extensive information on job search behavior and direct measures for the social network of individuals. Our findings confirm theoretical expectations. Individuals with larger networks use informal search channels more often and shift from formal to informal search. We find that informal search is mainly considered a substitute for passive, less cost intensive search channels. In addition to that, we find evidence for a positive relationship between the network size and reservation wages.

Keywords: Job Search Behavior, Unemployment, Social Networks

JEL Classification: J64

Suggested Citation

Caliendo, Marco and Schmidl, Ricarda and Uhlendorff, Arne, Social Networks, Job Search Methods and Reservation Wages: Evidence for Germany (September 1, 2010). DIW Berlin Discussion Paper No. 1055. Available at SSRN: https://ssrn.com/abstract=1679788 or http://dx.doi.org/10.2139/ssrn.1679788

Marco Caliendo (Contact Author)

University of Potsdam ( email )

August-Bebel Strasse 89
Potsdam, 14482
Germany
+49(0)331/9773225 (Phone)
+49(0)331/9773210 (Fax)

HOME PAGE: http://www.uni-potsdam.de/en/empwifo/news.html

Institute for the Study of Labor (IZA) ( email )

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

Ricarda Schmidl

IZA Institute of Labor Economics ( email )

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

Arne Uhlendorff

IZA Institute of Labor Economics ( email )

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

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