Social Contacts and Occupational Choiceâ - Cemfi
Social Contacts and Occupational Choice ∗Samuel Bentolila, Claudio Michelacci, and Javier SuarezCEMFIApril 2008AbstractSocial contacts help find jobs, but not necessarily in the occupations whereworkers are most productive. Hence social contacts can generate mismatch betweenworkers’ occupational choices and their productive advantage. Accordinglysocial networks can lead to low labor force quality, low returns to firms’ investment,and depressed aggregate productivity. We analyze surveys from the US andEurope including information on job finding through contacts. Consistent withour predictions, contacts reduce unemployment duration by 1-3 months on average,but they are associated with wage discounts of at least 2.5%. We also findsome evidence of negative externalities on aggregate productivity.JEL Codes: J24, J41, O15.Keywords: social networks, mismatch, wages, aggregate productivity.∗ The first author is also affiliated with CEPR and CESifo, the second and third with CEPR. Wewould like to thank the editor, Tore Ellingsen, and two anonymous referees for very helpful comments.We also wish to thank Harry Holzer for helping us locate the US data, and Manuel Arellano, HenryFarber, John Ham, Andrea Ichino, Lawrence Katz, Alan Manning, Steve Pischke, Pedro Portugal,Mauro Sylos Labini, and Frank Vella for comments and suggestions, and Cristina Barceló for help withthe ECHP dataset. We are also grateful to seminar audiences at the European University Institute, theHumboldt University in Berlin, the London School of Economics, Universitat Autònoma de Barcelona,Universidad Carlos III de Madrid, and at the Conference on “Advances in Economic Research” inUniversidad de Navarra. Financial support from the Spanish Ministerio de Ciencia y Tecnología throughProject SEC2000-279 is gratefully acknowledged. Authors’ contact details: CEMFI, Casado del Alisal,5, 28014 Madrid, Spain; E-mail: firstname.lastname@example.org, email@example.com, firstname.lastname@example.org.