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Why are similar workers paid differently? the role of social networks

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  • Fontaine, François
Abstract
We provide a matching model where identical workers are embedded in ex ante identical social networks. Job arrival rate is endogenous and wages are bargained. We study the evolution of networks over time and characterize the equilibrium distribution of unemployment rates across networks. Within our framework wage dispersion arises endogenously as the consequence of the dynamics of networks, firms' strategies and wage bargaining. We show that networks induce new search externalities which shape the dynamics of the labor market. Our endogenous framework allows us to quantify these effects.

Suggested Citation

  • Fontaine, François, 2008. "Why are similar workers paid differently? the role of social networks," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 3960-3977, December.
    • Handle: RePEc:eee:dyncon:v:32:y:2008:i:12:p:3960-3977
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    More about this item

    Keywords

    Social networks Job search Matching Wage dispersion;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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