In Simple Words
Imagine a community garden club formed so members can trade excess vegetables during dry seasons. If a local company asks club members to hire factory workers, members will use job offers as favors to support struggling club friends rather than finding people with actual factory skills.
Observed gifts reported by male referrers in Kolkata
- Between relatives
- Over 35% of reported gifts
- Between coworkers
- 2% of reported gifts
Observed shares of reported gifts, not gifts per person or effects on hiring. Other relationship types account for the remaining gifts.
See source →Research question
Social networks formed primarily to provide mutual financial insurance and risk sharing generate negative spillovers when repurposed for employer screening because network members prioritize social transfers over candidate job productivity.
Participants
N = 561 male labor market participants in Kolkata, India.
Study Design
Micro-survey network analysis on financial transfers and gifts combined with theoretical modeling of network transfers in employee referral decisions.
Results
Over 35% of reported gifts and high-value loans (at least Rs 500) occurred between relatives compared to only 2% between coworkers, driving referrers to select low-skilled relatives unless external employer incentives outweigh social transfers.
Takeaway
Analyze the non-work social functions of employee networks before introducing referral programs to anticipate where informal social obligations might conflict with recruitment goals.