Highlights

By using extensive Hungarian administrative data, this study aims to provide empirical evidence that former university ties strongly influence the labour market outcomes of individuals, even early in their careers. The estimates focus on the early career paths of graduates who obtained a master's degree between 2010 and 2017. As direct information on social contacts is not available in the dataset, we proxy university peers as students who started and finished the same university programmes (bachelor's or master's) in the same semester. Our results suggest that individuals are more likely to get hired by given firms if their former peers work there. The measured effects are considered significant and quite robust, even after controlling for the important sources of potential bias. Although we cannot present exact proof of the direct help of contacts, we provide suggestive evidence that seems to confirm the existence of such assistance. Our findings also revealed that the measured benefits are mainly attributable to connections from bachelor's studies. The effect of master's peers is mostly driven by the selection of individuals alongside prevalent study track-firm pathways. By comparing entries into new firms with and without peers, we also show that graduates with links have better labor market outcomes after hiring: they earn higher wages, obtain better and more prestigious positions, and stay longer at their new firm. The results draw attention to the importance of university peers in the labour market and contribute to the discussions about the determinants of early labour market success.

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The dissertation focuses on the impact of social networks on the economic and employment opportunities of individuals. It examines the direct and indirect effects of professional ties on various labor market outcomes, such as job finding probabilities, wages, job stability, and upward mobility. Following recent trends in the measurement of network effects, the empirical work takes a relatively novel approach to quantify the economic benefits of social ties by utilizing a large Hungarian linked administrative employer-employee panel dataset. While the dataset does not contain direct information on social ties, it does have anonymous firm and individual identifiers, which can be used to identify different segments of networks, such as former co-workers and university peers. Building on studies using similar data, elaborating on empirical approaches already used to measure network effects, and incorporating recent developments in panel data methods, the dissertation presents three empirical studies on the role of social ties in the labor market.

Study 1 focuses on wage gains by former co-workers and reveals on average 5% advantage. Half of the gains come from better matches and on-the-job effects, while the remaining part comes from contacts helping firms attract better workers and individuals find higher-paying firms. Study 2 investigates gender differences in the effects of former co-workers on job finding and upward mobility. Social ties influence both, but benefits are unevenly distributed within and between genders, with the largest gaps found in the top segments of the labor market. Study 3 shows that peers from university influence early-career labor market outcomes of master's graduates. They increase the career entrants' chances of getting into firms and securing better jobs, but the benefits are primarily from BA ties, rather than ties from MA. Overall, the dissertation provided some new empirical evidence on the dual nature of networks as sources of economic benefits and amplifiers of labor market inequalities.

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Thesis booklet in English

Thesis booklet in Hungarian

The increasing regional divergence in wages and labor market participation in the Western world has been linked to constraints on inter-regional mobility. Social networks, which have been shown to influence human behavior and mobility decisions, may play a role in determining whether individuals are able to move to high-opportunity regions. This study uses employer-employee data from Sweden to investigate the influence of social networks on residential mobility, specifically examining the effect of family ties, former co-workers, and university peers on the migration decisions of individuals aged 18-35. The study finds that the presence of social contacts at the target destination increases the probability of a move, with the importance of different types of ties varying by marital status. The study also finds that people are more likely to move to places where they have contacts if the target region is less accessible or if they are less resourceful in terms of income or education. Overall, the results suggest that social networks can play a significant role in determining mobility to high-opportunity regions and highlight the potential importance of policies aimed at increasing social connectedness in disadvantaged regions.

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Summary article in the Hungarian press

Today, there are still significant gender differences regarding the chances of becoming a manager and in the wages of managers. The aim of our study is to contribute to the analysis of the gender wage gap by exploring a new element, the occupational pathways leading to managerial positions and especially the gender differences in these career patterns. In our empirical setting, we use fixed effects panel regressions and decomposition techniques to quantify the contribution of occupational patterns to managerial wages and to the gender gap in managerial wages. Using administrative data of the Databank of the Centre for Economic and Regional Studies, we analyze the wages of 3837 workers in their first managerial position and show a male wage advantage of about 12 percent. We find that around one-third of the variance of managers’ wages can be explained by prior career, with the larger share coming from the sequences of occupations (occupational patterns and transitions) rather than the occupations themselves. With regard to the gender wage gap, only a smaller share is explained by differences in prior career, of which the larger part coming from the occupations themselves. Our analysis, therefore, shows that selection by occupational career path is also strongly present among those who become managers, and has an impact on both the wages experienced in first managerial positions and the gender pay gap.

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We address the presence, magnitude, and composition of wage gains related to former co-workers  and  discuss  the  mechanisms  that  could  explain  their  existence.  Using  Hungarian  linked  employer–employee administrative data and proxying actual co-workership with overlapping work histories, we show that the overall wage gain attributable to former co-workers consists of  multiple  elements:  a  contact-specific,  an  individual-specific,  a  firm-specific  and  a  match-  specific component. Former co-workers, besides the direct effect of their presence, may funnel individuals  into  high-paying  firms,  enhance  the  sorting  of  good  quality  workers  into  firms,  and  may  contribute  to  the  creation  of  better  employer–employee  matches.  By  introducing  and applying a wage-decomposition technique, we demonstrate that there are non-negligible differences  between  linked  and  market  hires  in  all  empirically  separable  wage  elements.  By  focusing on specific scenarios, we provide additional empirical evidence in favor of employee referral and information transmission as the main drivers of co-worker gains.

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The summary of the paper in Hungarian is available here