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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

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Labor Market and Search through Personal Contacts

Roman Chuhay
Published Online: 2013-06-21 | DOI: https://doi.org/10.1515/bejte-2012-0021


In this article, we consider the impact of personal contacts on the labor market outcome. Unlike previous studies, we do not assume any particular network structure or vacancies communication protocol. Instead, we state three general properties of matching functions that allow us to establish the existence and uniqueness of equilibrium and characterize the impact of social ties on the labor market. In particular, we show that a monotonically increasing matching function in socialization level is a necessary and sufficient condition for having monotonically decreasing unemployment and increasing wage and market tightness. However, the same does not apply to vacancy rate. We establish a condition under which a monotonically increasing matching function produces a vacancy rate that first increases in socialization level, but then decreases.

Keywords: labor market; unemployment; matching; search; social network; referrals

JEL Classification Numbers: J63; J64; D83; E24


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About the article

Published Online: 2013-06-21

Published in Print: 2013-01-01

Citation Information: The B.E. Journal of Theoretical Economics, Volume 13, Issue 1, Pages 191–213, ISSN (Online) 1935-1704, ISSN (Print) 2194-6124, DOI: https://doi.org/10.1515/bejte-2012-0021.

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