Research Interests : Macro Labor - Search and Matching, Social Networks, Inequality, and Economic Theory

Papers

"The Cyclical Behavior of a Firm's Optimal Market and Referral Hiring (PDF)

Abstract: Empirical evidence from the United States (U.S.) and the European Union (EU) shows that referral hiring is pro-cyclical, while market hiring is counter-cyclical, with labor productivity. I build and calibrate a stochastic search-and-matching model in which firms choose how to allocate recruiting resources between market and referral hiring. Expected match quality is endogenous, and conditional on successful matching, workers hired through referrals earn expected wages about 13% higher. The firm's optimal allocation is governed by a quantity-quality-cost trade-off. In particular, the referral channel is less scalable in converting vacancy-side network connections into filled jobs, but it is more likely to generate a good-fit applicant and has a lower per-hire cost. I also allow referral effectiveness to differ from the network-implied contact rate through a reduced-form referral wedge that governs how referral links convert into hiring-relevant opportunities, and I allow referral job filling to be further limited by employee-side transmission congestion when many referral vacancies are processed through the same stock of employed workers. I study three aggregate environments: productivity shocks only; a linked separation-risk specification in which separations are counter-cyclical with productivity; and a joint-shock specification in which separation risk fluctuates independently. I show that turnover risk strengthens cyclical reallocation across channels by shifting expected match duration and vacancy creation. Quantitatively, the joint specification generates the largest hiring fluctuations among the three environments. It accounts for about 81% of cyclical variation in market hiring and 66% in referral hiring in the targeted U.S. economy. By contrast, the other regimes generate about 23-53% of cyclical hiring variation in the U.S.

"Market vs Referral Hiring: Implications on Aggregate Welfare, Match Quality and Wage Inequality with Yun Pei (PDF)

Abstract: Empirical evidence from the Survey of Consumer Expectations (SCE) suggests that, in the U.S., between 2013 and 2021, on average, about 50% of workers were hired by a firm through employee referrals and the market channel during a given survey year. This paper builds and calibrates a deterministic Diamond-Mortensen-Pissarides (DMP) search and matching model to study what governs a firm’s optimal market and referral hiring decisions. At the calibrated steady state, we find that, relative to the market channel, the referral channel is more likely to produce a good match, is associated with a lower hiring cost, but also has a lower probability of a match. These trade-offs eventually imply that each channel is equally profitable to hire for a firm. Furthermore, the model is simulated to show that the market hiring rate decreases and the referral hiring rate increases with labor productivity, implying higher aggregate match quality and expected wage gap, favoring referred applicants. Regarding the policy implications of the model, higher unemployment benefits decrease vacancy postings, which in turn increase the unemployment rate, reduce market tightness, encourage market hiring, and discourage referral hiring.

Work in Progress

"A Dynamic Model of a Firm's Market and Referral Hiring"

"Optimal Unemployment Insurance and Firm's Market & Referral Hiring "