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In this paper, the search model is proposed, in which homogeneous firms are uncertain about the job seekers' number of friends, who can help them in the job search (social capital). All workers have the same productivity and differ only in the social capital. A firm offers a take-it-or-leave-it...
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capital is endogenous, so that better connected workers bargain higher wages for a given level of productivity. This is a … positive effect of referrals on reservation wages. At the same time, employees accept job offers from more productive employers … lower than the average productivity in the market. This is a negative selection effect of referrals on wages. In the …
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large. This is in contrast to the result of Blazquez and Jansen (2008) showing that the distribution of wages is compressed …
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on whether it actually matters for wages, and if it does, what are the underlying mechanisms. We empirically examine … successfully find a job in a competitive market) to potential employers, resulting in lower wages; and 2) there exists a trade …-off between wages and search efficiency for quicker entry into local labor market. We also find some evidence that the informal …
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