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Moon, Ji-Woong
Journal of monetary economics, March 2023, 2023-03-00, Letnik: 134Journal Article
Referrals are prevalent in the U.S. labor market. To understand their aggregate effects, this paper studies an equilibrium model of on-the-job search and job referrals. In the model, referrals are modeled as a strategic interaction between a referrer and a firm. The equilibrium model shows that referrals benefit job searchers whose outside option is above a threshold. I support this prediction by showing that the referral wage premium exists only for employed job searchers. Quantitatively, referrals contribute to the total output by 3.93% through transmitting information and reducing search costs. The information transmission explains about 28% of the effects.
