Optimal policy and the role of social contacts in a search model with heterogeneous workers
Stupnytska Y, Zaharieva A (2013) Working Papers in Economics and Management; 18-2013.
Bielefeld: Bielefeld University, Department of Business Administration and Economics.
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| Veröffentlicht | Englisch
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Abstract / Bemerkung
This paper develops a search model with heterogeneous workers and social networks.
High ability workers are more productive and have a larger number of professional contacts.
Firms have a choice between a high cost vacancy in the regular labour market and a low cost
job opening in the referral market. In this setting the model predicts that a larger number of
social contacts is associated with a larger wage gap between high and low ability workers and
a larger difference in the equilibrium unemployment rates. Next we demonstrate that the
decentralized equilibrium is inefficient for any value of the bargaining power. There are two
reasons for the inefficiency. First, the private gain from creating a job in the referral market
is always below the social gain, so the equilibrium unemployment of high ability workers is
above its optimal value. Moreover, high ability workers congest the market for low ability
workers, so the equilibrium wage inequality is inefficiently large. This is in contrast to the
result of Blazquez and Jansen (2008) showing that the distribution of wages is compressed
in a search model with heterogeneous workers. Finally, we show that a combination of taxes
and subsidies can restore the optimal allocation.
Stichworte
social capital;
social networks;
referrals;
wage dispersion;
wage compression
Erscheinungsjahr
2013
Serientitel
Working Papers in Economics and Management
Band
18-2013
Seite(n)
24
ISSN
2196-2723
Page URI
https://pub.uni-bielefeld.de/record/2915425
Zitieren
Stupnytska Y, Zaharieva A. Optimal policy and the role of social contacts in a search model with heterogeneous workers. Working Papers in Economics and Management. Vol 18-2013. Bielefeld: Bielefeld University, Department of Business Administration and Economics; 2013.
Stupnytska, Y., & Zaharieva, A. (2013). Optimal policy and the role of social contacts in a search model with heterogeneous workers (Working Papers in Economics and Management, 18-2013). Bielefeld: Bielefeld University, Department of Business Administration and Economics. doi:10.4119/unibi/2915425
Stupnytska, Yuliia, and Zaharieva, Anna. 2013. Optimal policy and the role of social contacts in a search model with heterogeneous workers. Vol. 18-2013. Working Papers in Economics and Management. Bielefeld: Bielefeld University, Department of Business Administration and Economics.
Stupnytska, Y., and Zaharieva, A. (2013). Optimal policy and the role of social contacts in a search model with heterogeneous workers. Working Papers in Economics and Management, 18-2013, Bielefeld: Bielefeld University, Department of Business Administration and Economics.
Stupnytska, Y., & Zaharieva, A., 2013. Optimal policy and the role of social contacts in a search model with heterogeneous workers, Working Papers in Economics and Management, no.18-2013, Bielefeld: Bielefeld University, Department of Business Administration and Economics.
Y. Stupnytska and A. Zaharieva, Optimal policy and the role of social contacts in a search model with heterogeneous workers, Working Papers in Economics and Management, vol. 18-2013, Bielefeld: Bielefeld University, Department of Business Administration and Economics, 2013.
Stupnytska, Y., Zaharieva, A.: Optimal policy and the role of social contacts in a search model with heterogeneous workers. Working Papers in Economics and Management, 18-2013. Bielefeld University, Department of Business Administration and Economics, Bielefeld (2013).
Stupnytska, Yuliia, and Zaharieva, Anna. Optimal policy and the role of social contacts in a search model with heterogeneous workers. Bielefeld: Bielefeld University, Department of Business Administration and Economics, 2013. Working Papers in Economics and Management. 18-2013.
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