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: Firms recruit through both market channels and referral networks, yet standard search-and-matching models generally treat hiring as a single technology. Using evidence from the CPS, JOLTS, the Survey of Consumer Expectations, and U.S. national accounts, I document that the market hiring share is procyclical, while referrals become relatively more important in downturns. I develop and quantify a stochastic Diamond-Mortensen-Pissarides model in which firms create vacancies and allocate recruiting activity between market and referral channels. The channels differ in scale, cost, vacancy-filling effectiveness, and expected match quality. Market recruiting reaches a broader applicant pool and fills vacancies more readily, whereas referrals are less costly and more likely to produce good matches conditional on contact, but are constrained by network access, information transmission, and referral-conversion frictions. Labor-productivity shocks generate endogenous reallocation across channels by changing vacancy creation, market tightness, screening conditions, referral congestion, and match composition. The calibrated model matches key stationary labor-market and hiring-composition moments and reproduces the observed direction of cyclical channel reallocation. Quantitatively, it generates 35 percent of observed vacancy volatility, 20 percent of tightness volatility, and 41 percent of referral hiring-share volatility, although it understates unemployment and aggregate vacancy-filling volatility and overstates market hiring-share volatility. The results establish hiring-channel choice as a distinct propagation margin while showing the limits of productivity shocks as a complete explanation of hiring fluctuations.

"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 "