Asimamaw Belete (Bielefeld University)
Anna Zaharieva
We study new employment relationships and analyze a link between the job search channel and the moving distance as well as its implications for occupational mismatch. Using data from the German Socio-economic Panel, we show that jobs transmitted by social contacts involve shorter moving distances compared to the formal job search. Building on this evidence we develop a theoretical search and matching model where individuals are uniformly distributed on a unit distance between two cities and seek a job in either city by applying formally or using help of their social contacts. Jobs have heterogeneous match qualities, moreover, accepting a job is associated with a cost of moving to the city. The model predicts that social contacts generate more mismatch than formal search. The reason is that information transmitted through social networks is biased towards the nearest city and individuals are more likely to accept mismatch in the nearest city in order to reduce the cost of moving. This prediction is confirmed by the data.