Research Interests : Macroeconomics, Labor Economics, Social Networks, Inequality, and Economic Theory

Papers

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

Abstract: Firms recruit for the same vacancies through both formal market channels and informal referral networks, yet standard search-and-matching models typically treat hiring as a single technology. Using evidence from the CPS, JOLTS, the Survey of Consumer Expectations, and U.S. national accounts, I document systematic cyclical variation in hiring composition. I develop a stochastic Diamond-Mortensen-Pissarides model in which firms create vacancies and allocate hiring effort between market and referral technologies. A vacancy can be reached through either channel. Market hiring provides greater marginal vacancy-filling capacity, while referral hiring has a lower hiring-cost coefficient and generates greater expected surplus conditional on a fill. This quantity-quality-cost trade-off sustains an interior hiring allocation. Aggregate activity shocks generate endogenous reallocation between market and referral hiring but account for only about 6 percent of the observed cyclical variation in hiring composition. Allowing the flow of usable referral information to vary over time raises the model-implied volatility of the market--referral hiring mix to 1.37 percentage points, compared with 1.26 percentage points in the data, while also closely reproducing its persistence and comovement with aggregate activity. The results show that hiring-channel choice constitutes a distinct propagation margin: changes in aggregate conditions affect not only how many vacancies firms create, but also how they hire and through which channels hires are ultimately generated.

"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 "