Open Access
Referral Networks and the Allocation of Talent
Loading...
Files
ECO_2012_18.pdf (429.64 KB)
2012/18
License
Cadmus Permanent Link
Full-text via DOI
ISBN
ISSN
1725-6704
Issue Date
Type of Publication
Keyword(s)
LC Subject Heading
Other Topic(s)
EUI Research Cluster(s)
Initial version
Published version
Succeeding version
Preceding version
Published version part
Earlier different version
Initial format
Author(s)
Citation
EUI ECO; 2012/18
Cite
POTHIER, David, Referral Networks and the Allocation of Talent, EUI ECO, 2012/18 - https://hdl.handle.net/1814/22634
Abstract
We study a model of occupational choice where workers must rely on their social contacts to acquire job vacancy information. Contrary to the existing literature, we allow for worker heterogeneity in terms of their idiosyncratic skill-types. In this case, the allocation of talent (the matching of skills to tasks) becomes a welfare-relevant consideration. A worker’s skill-type determines both his relative cost of specialising in different occupations and his productivity on the job. The model shows that relying on word-of-mouth communication for job search generates both positive externalities (due to improved labour market matching) and negative externalities (due to a poor allocation of talent). Which effect dominates depends on the properties of the job search and productivity functions. Taking into account worker heterogeneity shows that the degree of occupational segregation in competitive labour markets is generally not efficient.