SummaryUsing a search-theoretical model proposed by Montgomery (1992), we analyze the effects of information flow via social networks (friends, relatives, and other personal contacts) on monetary and non-monetary labor market outcomes. Propensity score matching on survey data from low-status unemployed respondents is used to identify causal effects. The analysis takes into account unobserved heterogeneity by applying Rosenbaum bounds. We show that the standard approach to investigating labor market outcomes in terms of how jobs are found is misleading. As an alternative, we propose focusing comparative analyses of labor market outcomes on how individuals search for jobs and, more particularly, on whether they search for jobs via social networks. Using this approach we find no evidence for causal effects on monetary outcomes such as wages and wage satisfaction. We also find no effects for non-monetary outcomes like job satisfaction.
Job Search Requirements, Effort Provision and Labor Market Outcomes