Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes

Specifically, we examine the propensity of a pair of individuals to work in the same location,
comparing such propensities for pairs of individuals that reside on the same versus nearby blocks
within a block group. We take the propensity to work in the same location as an indication that
one member of the pair provided a referral (or more generally information) to the other member
about jobs available in her place of work.

Our results indicate the existence of significant social interactions at the block level;
residing on the same versus nearby blocks increases the probability of working together by over
33 percent. As a consequence, individuals are about 6.9 percentage points more likely to work
with at least one person on their block than they would be in the absence of referrals. This result
is robust to the introduction of detailed controls for the characteristics of the individuals in the
pair as well as across various specifications intended to address the possibility of within block
group sorting and reverse causation.

Our analysis also indicates that there is considerable variation in the likelihood of
referrals across different pairs of neighbors. We estimate, for example, that a referral is
significantly more likely among pairs of high school graduates, pairs of young adults, and pairs in
which members have children of a similar age. More generally, our findings are broadly
consistent with two common empirical findings in the existing literature on social networks and
on informal hiring channels: (i) that there is strong assortative matching within social networks
and (ii) that referrals can only occur when at least one member of the pair is well-attached to the
labor market.

This analysis of heterogeneous referral effects serves a second purpose in our analysis. In
particular, it allows us to develop an individual-specific measure of the availability of referral
opportunities on each block in the metropolitan area. The resulting estimate of match quality
provides a novel measure of neighborhood quality based on the specific match between an
individual’s characteristics and those of her neighbors. We include this measure in a series of
standard regressions for labor force participation, employment, wages, and earnings (along with
block group fixed effects and controls for both individual and block-level neighbor attributes).
Given that many workers that receive a referral would likely find employment through some
other search method in the absence of a referral, the results of these regressions provide a direct
measure of the ultimate impact of neighborhood referrals on labor market outcomes. The results
of this portion of our analysis reveal that neighborhood referral effects have a (statistically and
economically) significant positive impact on all labor market outcomes under consideration; a
one standard deviation increase in the match quality, for example, raises expected labor force

<<   1   2   3   4   5   6   7   >>

More intriguing information