How Vacancy Referrals affect Job Search : Evidence from Job Applications Data

Vacancy referrals by caseworkers represent an effective and widely-used job search assistance tool. However, little is known about the mechanisms through which they affect job finding. This paper uses granular longitudinal job applications data with firms’ responses to shed light on those mechanisms. Controlling for individual-by-unemployment duration fixed effects, we find that referred applications have a much higher probability of success (callback or job offer). These effects are driven by the fact that referred vacancies exhibit different and potentially lower-paying characteristics. Aggregating data to the monthly-individual level and using caseworker stringency as an instrument, we show that job seekers apply more in months when the referral policy is used, in spite of a slight reduction in their private application effort. This eventually translates into a large increase in the number of job interviews and offers they obtain per month