Unraveling the paradox of job search via personal contacts and wages: Evidence combining agent based modelling and empirical research

Author: Dr Gerhard Krug
Affiliation: University of Erlangen-Nuremberg
Email: gerhard.krug@fau.de

Paper Details

Researching the effect of personal contacts on wages, two potential social mechanisms are of interest: better job chances and better wages. An agent based model shows that wage regressions using personal contacts as independent variable never produces an unbiased estimate of the true effect size and sometimes the estimate even has the opposite sign of the true causal wage effect of networks. I compare these results to evidence from multilevel survey data and find that in countries where personal contacts are effective in producing job offers, the share of jobs actually found via personal contacts is lower and vice versa.