Department of Economics and Business Economics

Learning through coworker referrals

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Standard

Learning through coworker referrals. / Glitz, Albrecht; Vejlin, Rune.

In: Review of Economic Dynamics, Vol. 42, 10.2021, p. 37-71.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Harvard

Glitz, A & Vejlin, R 2021, 'Learning through coworker referrals', Review of Economic Dynamics, vol. 42, pp. 37-71. https://doi.org/10.1016/j.red.2020.10.007

APA

Glitz, A., & Vejlin, R. (2021). Learning through coworker referrals. Review of Economic Dynamics, 42, 37-71. https://doi.org/10.1016/j.red.2020.10.007

CBE

MLA

Glitz, Albrecht and Rune Vejlin. "Learning through coworker referrals". Review of Economic Dynamics. 2021, 42. 37-71. https://doi.org/10.1016/j.red.2020.10.007

Vancouver

Glitz A, Vejlin R. Learning through coworker referrals. Review of Economic Dynamics. 2021 Oct;42:37-71. https://doi.org/10.1016/j.red.2020.10.007

Author

Glitz, Albrecht ; Vejlin, Rune. / Learning through coworker referrals. In: Review of Economic Dynamics. 2021 ; Vol. 42. pp. 37-71.

Bibtex

@article{f5bcbf5709ce40f5a8f11894f196d9ae,
title = "Learning through coworker referrals",
abstract = "In this paper, we study the role of coworker referrals for labor market outcomes. Using comprehensive Danish administrative data covering the period 1980 to 2005, we first document a strong tendency of workers to follow their former coworkers into the same establishments and provide evidence that these mobility patterns are likely driven by coworker referrals. Treating the presence of a former coworker in an establishment at the time of hiring as a proxy for a referral, we then show that referred workers initially earn 4.6 percent higher wages and are 2.3 percentage points less likely to leave their employers than workers hired through the external market. Consistent with a theoretical framework characterized by higher initial uncertainty in the external market but the possibility of subsequent learning about match-specific productivity, we show that these initial differences gradually decline as tenure increases. We structurally estimate a stylized model using indirect inference and find that the noise of the initial signal about a worker's productivity is 14.5 percent lower in the referral market than in the external market, and that firms learn about their workers' true match-specific productivity with a probability of 48.4 percent per year. Counterfactual simulations show that average wages are lower in the absence of a referral market, primarily because of lower average match productivity in the external market.",
keywords = "Employer learning, Networks, Referrals, Turnover, Wages",
author = "Albrecht Glitz and Rune Vejlin",
year = "2021",
month = oct,
doi = "10.1016/j.red.2020.10.007",
language = "English",
volume = "42",
pages = "37--71",
journal = "Review of Economic Dynamics",
issn = "1094-2025",
publisher = "Academic Press",

}

RIS

TY - JOUR

T1 - Learning through coworker referrals

AU - Glitz, Albrecht

AU - Vejlin, Rune

PY - 2021/10

Y1 - 2021/10

N2 - In this paper, we study the role of coworker referrals for labor market outcomes. Using comprehensive Danish administrative data covering the period 1980 to 2005, we first document a strong tendency of workers to follow their former coworkers into the same establishments and provide evidence that these mobility patterns are likely driven by coworker referrals. Treating the presence of a former coworker in an establishment at the time of hiring as a proxy for a referral, we then show that referred workers initially earn 4.6 percent higher wages and are 2.3 percentage points less likely to leave their employers than workers hired through the external market. Consistent with a theoretical framework characterized by higher initial uncertainty in the external market but the possibility of subsequent learning about match-specific productivity, we show that these initial differences gradually decline as tenure increases. We structurally estimate a stylized model using indirect inference and find that the noise of the initial signal about a worker's productivity is 14.5 percent lower in the referral market than in the external market, and that firms learn about their workers' true match-specific productivity with a probability of 48.4 percent per year. Counterfactual simulations show that average wages are lower in the absence of a referral market, primarily because of lower average match productivity in the external market.

AB - In this paper, we study the role of coworker referrals for labor market outcomes. Using comprehensive Danish administrative data covering the period 1980 to 2005, we first document a strong tendency of workers to follow their former coworkers into the same establishments and provide evidence that these mobility patterns are likely driven by coworker referrals. Treating the presence of a former coworker in an establishment at the time of hiring as a proxy for a referral, we then show that referred workers initially earn 4.6 percent higher wages and are 2.3 percentage points less likely to leave their employers than workers hired through the external market. Consistent with a theoretical framework characterized by higher initial uncertainty in the external market but the possibility of subsequent learning about match-specific productivity, we show that these initial differences gradually decline as tenure increases. We structurally estimate a stylized model using indirect inference and find that the noise of the initial signal about a worker's productivity is 14.5 percent lower in the referral market than in the external market, and that firms learn about their workers' true match-specific productivity with a probability of 48.4 percent per year. Counterfactual simulations show that average wages are lower in the absence of a referral market, primarily because of lower average match productivity in the external market.

KW - Employer learning

KW - Networks

KW - Referrals

KW - Turnover

KW - Wages

UR - http://www.scopus.com/inward/record.url?scp=85093691714&partnerID=8YFLogxK

U2 - 10.1016/j.red.2020.10.007

DO - 10.1016/j.red.2020.10.007

M3 - Journal article

AN - SCOPUS:85093691714

VL - 42

SP - 37

EP - 71

JO - Review of Economic Dynamics

JF - Review of Economic Dynamics

SN - 1094-2025

ER -