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Social Connections and the Matching of Workers and Firms

Oskar Nordström Skans (Uppsala University)

2 mars 2017  -  11:00-12:30, salle Extranef 109

Host(s): Rafael Lalive

We show that firm-level hiring decisions are causally affected by shocks to its available supply of socially connected labor. We use Swedish economy-wide register data to measure firms’ connections (family members, coworkers, classmates, socially close neighbors) and rely on displacement shocks for causal identification. Attractive firms (defined from productivity and other measures) hire more of their new workers through social connections. By contrast, less attractive firms are more responsive to displacement shocks within social networks. This suggests that low-productive firms need to recruit through the market because they are constrained by their social connections' outside options. Closer social connections (between family members, socially similar agents, formed in small groups, recently formed…) result in more matches. Firms use the opportunity offered by these displacement shocks and the associated increased supply of connected labor to grow in terms of employment and production, with retained labor productivity.

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