Three Essays on Social Networks in Labor Markets

This dissertation consists of three essays examining the important role of jobconnections, references, and word of mouth information in labor markets. The first essay examines the importance of job connections for internal migrants. Inthis chapter, I develop a theoretical model where labor market networks providelabor market information with less noise than information obtained in the formalmarket. This model predicts lower initial wages and greater wage growth aftermigration for migrants without contacts. I then use data from the National LongitudinalStudy of Youth (NLSY) to examine whether migrants who used socialconnections when finding their first job assimilate faster in the new region. Consistentwith the theoretical model, I find that migrants who did not use socialconnections take longer to assimilate in the new region. The second essay models how screening workers through social networks impactslabor mobility in markets with adverse selection. When there is asymmetricinformation in labor markets, worker mobility is constrained by adverse selectionin the market for experienced workers. However, if workers can acquire referencesthrough their social networks then they can move more easily between jobs. Inthis chapter I develop a simple labor market model in which workers can learnthe productivity of other workers through social interaction. I show that networksincrease wages and mobility of high-productivity experienced workers; however,networks discourage workers from accepting jobs outside their job-contact network,because of adverse selection. The third essay in this dissertation examines the importance of social networksin labor markets when work is produced jointly. Most employers cite poorattitude and poor fit with firm culture as their greatest problems in recruitingemployees, rating these factors more important than skill. This is easily explainedwhen the output of the firm requires that workers engage in work together. In thisessay, I explain why it might be rational for firms to hire through social networkseven when worker skill is observed perfectly, if these workers are better able to dojoint work with the firms existing employees.