Authors	Caliendo, M., Schmidl, R. and Uhlendorff, A.
Year	2009
Reference	Working Paper, Bonn.
Keywords	Job Search Behavior, Unemployment, Social Networks
JEL-Classification	J64
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Abstract	In this paper we analyze the influence of social networks on job search behavior of unemployed individuals. Standard theory suggests that people with strong networks utilize informal channels more often and - by the increase in productivity of that search - set higher reservation wages. Furthermore it is expected that individuals with very productive networks substitute formal search for informal search, and that networks increase the expected reemployment probability of the unemployed. We use the IZA Evaluation Dataset - an extensive novel data set containing information on 18,000 individuals interviewed shortly after entering unemployment - to test these hypotheses, within a structural model of job search. The empirical findings underscore the established importance of networks on job search behavior in the sense that individuals with large networks use informal search channels more often. The effects of an increased productivity of informal search are as predicted, but confirmed only for certain certain subgroups. In particular we find that networks play a bigger role for middle-aged individuals than young ones (below 25 years) and older ones (above 45 years). Furthermore, it can be seen that medium skilled rely on their network on their network of friends, while high skilled obtain valuable information through their network of former colleagues.