Relational Network Substitution
RCTReview
In informal labor markets, social pressures compel workers to utilize job referrals for family income-sharing rather than labor matching. High-performing candidates remain excluded from referral pipelines unless financial structures incentivize referrers to cross social network boundaries.
Picture this
Imagine a worker who belongs to two group chats: a family chat and a former coworkers chat. Under standard conditions, social obligation forces the worker to post job openings in the family chat; introducing a performance bonus causes the worker to post the job in the coworker chat instead.
What the evidence says
Performance pay incentives decreased relative referrals by 7 percentage points and increased coworker referrals by 8 percentage points.
- Who was studied
- 562 original participants and 407 referrals (adult males aged 18 to 60) in Kolkata, India.
- How
- RCT laboratory experiment tracking referral relationship categories (relatives vs. coworkers) across fixed-fee and performance-pay treatment arms.
What to do
Track candidate-referrer social relationships (coworker vs family) in applicant tracking systems to monitor whether incentive changes successfully shift recruitment from informal kin networks to professional networks.
From the source
"OPs in the high performance pay treatment were 7 percentage points less likely to refer relatives and 8 percentage points more likely to refer coworkers."
Leveraging Social Networks for Job Referrals in India.pdf