AN EQUILIBRIUM LABOR MARKET MODEL WITH INTERNAL AND EXTERNAL REFERRALS

About 40% of workers find their jobs through referrals. We distinguish between two types of referrals based on whether the referrer works at the hiring firm (internal referrals) or not (external referrals). Interestingly, jobs found through internal (external) referrals pay more (less) than those found through formal methods. An equilibrium labor market model is then built by introducing an incentive‐compatible mechanism through which workers can share job opening information. A non‐degenerate wage distribution arises in equilibrium with a wage premium (penalty) for internal (external) referrals. When calibrated, our model can capture these salient features of the U.S. labor market.This article is protected by copyright. All rights reserved

• Publication year

  2023

• Venue

  International Economic Review

• Publication date

  2023-10-14

• Fields of study

  Not labeled

• Identifiers
  DOI 10.1111/iere.12671
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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