Social Networks, Employee Selection, and Labor Market Outcomes

We provide a direct empirical test of Montgomery’s 1991 notion that firms hire workers through social ties of productive employees as these workers know others with high unobserved productivity. We focus on coworker networks and show that firms recruit workers with better military draft test scores...

Full description

Saved in:
Bibliographic Details
Published in:Journal of labor economics 2016-10, Vol.34 (4), p.825-867
Main Authors: Hensvik, Lena, Skans, Oskar Nordström
Format: Article
Language:English
Subjects:
Employees
Hiring
Labor market
Military draft
Productivity
Social networks
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We provide a direct empirical test of Montgomery’s 1991 notion that firms hire workers through social ties of productive employees as these workers know others with high unobserved productivity. We focus on coworker networks and show that firms recruit workers with better military draft test scores but shorter schooling when hiring previous colleagues of current employees, suggesting that firms use these networks to attract workers with better qualities in hard-to-observe dimensions. Incumbent workers’ abilities predict the incidence, abilities, and wages of linked entrants. These results suggest that firms rely on the ability density of the studied networks when setting entry wages.
ISSN:0734-306X
1537-5307
1537-5307
DOI:10.1086/686253