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- Title
Referral Networks and Inequality.
- Authors
Galenianos, Manolis
- Abstract
This is the first article to study the interaction between labour markets and endogenous referral networks in the context of worker heterogeneity. In equilibrium the structure of the referral network is hierarchical, which is different from the usual assumption of homophily but is consistent with the evidence. Hierarchy exacerbates inequality. The welfare effects of the use of referrals are subtle and depend on the nature of heterogeneity. If heterogeneity is due to productivity differences, referrals improve welfare. If workers face the different probability of forming a match despite having the same productivity, as in the case of discrimination, referrals reduce welfare.
- Subjects
LABOR market; INDUSTRIAL welfare; EMPLOYMENT discrimination; EQUILIBRIUM; EQUALITY &; economics
- Publication
Economic Journal, 2021, Vol 131, Issue 633, p271
- ISSN
0013-0133
- Publication type
Article
- DOI
10.1093/ej/ueaa092