Social Contacts and Occupational Choice

41 Pages Posted: 21 Apr 2004

See all articles by Samuel Bentolila

Samuel Bentolila

Centro de Estudios Monetarios y Financieros (CEMFI); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Claudio Michelacci

Centre for Monetary and Financial Studies (CEMFI); Centre for Economic Policy Research (CEPR)

Javier Suarez

Centre for Monetary and Financial Studies (CEMFI); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2004

Abstract

Social contacts help workers to find jobs, but those jobs need not be in the occupations where workers are most productive. Hence social contacts can generate mismatch between a worker's occupational choice and their comparative productive advantage. Thus economies with dense social networks can exhibit apparently low labour force quality and, as a result, low returns to firms' investment and depressed aggregate productivity. We employ US and European data for the 1990's to test the key prediction that social contacts distort workers' occupational choices in a direction that reduces their apparent productivity. We find that the use of social contacts helps find jobs one to two months sooner but leads to individual wage discounts of 5% to 7% and produces negative externalities on aggregate productivity.

Keywords: Search, mismatch, occupational mobility

JEL Classification: J24, J41, O15

Suggested Citation

Bentolila, Samuel and Michelacci, Claudio and Suarez, Javier, Social Contacts and Occupational Choice (March 2004). CEPR Discussion Paper No. 4308. Available at SSRN: https://ssrn.com/abstract=527703

Samuel Bentolila (Contact Author)

Centro de Estudios Monetarios y Financieros (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain
+34 91 429 0551 (Phone)
+34 91 429 1056 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Claudio Michelacci

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain
+34 91 4290 551 (Phone)
+34 91 4291 056 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Javier Suarez

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain
+34 91 429 0551 (Phone)
+34 91 429 1056 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

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