Does Using Social Networks Lead to Better Job Opportunities? a Direct Test

Research on the effect of social networks on job search outcomes has provided mixed results. Some studies have found that the use of social contacts has positive effects on wages and on the other indicators of job quality while some others have shown negative effects. Previous studies, however, suffered from several methodological limitations such as selecting on the dependent variable or ignoring unobserved heterogeneity. In this paper, we develop a novel empirical approach studying job search by shifting the attention from search outcomes to the search process. Specifically, we investigate the effect of using social ties on the quality of jobs to which job seekers apply. Using within-person fixed effects regression models, we show that when the job seeker uses social contacts when searching for a job, she applies to the jobs that require less education and pay less than the jobs to which she applies through formal methods. These findings hold important implications for understanding the role of social contacts within the job search process.