Multi-Contextual Network Spillover Mismatch
RCTClinical Trial
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.
Picture this
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.
What the evidence says
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.
- Who was studied
- N = 561 male labor market participants in Kolkata, India.
- How
- Micro-survey network analysis on financial transfers and gifts combined with theoretical modeling of network transfers in employee referral decisions.
What to do
Analyze the non-work social functions of employee networks before introducing referral programs to anticipate where informal social obligations might conflict with recruitment goals.
From the source
"In a developing country setting like the one in this paper, the majority of the literature on networks emphasizes how individuals use network links to improve risk sharing... These spillovers may cause networks to smooth search frictions using network links that do not represent particularly strong job matches."
468 Job Referrals in India AER Dec12.pdf