Referral Hiring, Endogenous Social Networks, and Inequality: An Agent-Based Analysis

29 Pages Posted: 20 Nov 2010

See all articles by Simon Gemkow

Simon Gemkow

Bielefeld University

Michael Neugart

Technical University of Darmstadt

Date Written: April 13, 2010


The importance of referral hiring which is workers finding employment via social contacts is nowadays an empirically well documented fact. It also has been shown that social networks for finding jobs can create stratification. These analyses are by and large based on exogenous network structures. We go beyond the existing work by building an agent-based model of the labor market where the social network of potential referees is endogenous. Workers invest some of their endowments into building up and fostering their social networks as an insurance device against future job losses. We look into how social networks and inequality respond to increased uncertainty in the labor market. We find that larger variability in firms' labor demand reduces workers' efforts put into social networks leading to lower inequality.

Keywords: Referral Hiring, Endogenous Social Networks, Inequality, Agent-Based Model, Labor Market Transitions

JEL Classification: J63, J64

Suggested Citation

Gemkow, Simon and Neugart, Michael, Referral Hiring, Endogenous Social Networks, and Inequality: An Agent-Based Analysis (April 13, 2010). Available at SSRN: or

Simon Gemkow

Bielefeld University ( email )

Universitätsstraße 25
Bielefeld, NRW 33613

Michael Neugart (Contact Author)

Technical University of Darmstadt ( email )

Hochschulstraße 1
Darmstadt, 64289


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