We construct a database from the  rst 2011 wave of the Portuguese Labor Force Survey and analyze the transitions between labor market states and job search methods during six quarters. In Portugal, the individuals who use more formal job search methods are more likely to get a stable state of employment, while informal contacts, private agencies or newspaper adverts tend to lead to a permanent state of job seeking

Araújo, Tanya

Banisch, Sven

Neves, David

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        Tanya Araújo, David Neves and Sven Banisch The dynamics of innovation in job search strategies: some empirical findings                      WP15/2014/DE/UECE _________________________________________________________  Department of Economics WORKING PAPERS                     ISSN   2183-1815       The dynamics of innovation in job search strategies:some empirical ﬁndingsTanya Araújo∗, David Neves∗ and Sven Banisch∗∗* ISEG - University of Lisbon andResearch Unit on Complexity in Economics (UECE), Portugaldneves@iseg.ulisboa.pt tanya@iseg.ulisboa.pt** Mathematical Physics, Bielefeld University, Germanysven.banisch@UniVerseCity.DeAbstractWe construct a database from the ﬁrst 2011 wave of the Portuguese Labor Force Survey andanalyze the transitions between labor market states and job search methods during six quarters.In Portugal, the individuals who use more formal job search methods are more likely to get astable state of employment, while informal contacts, private agencies or newspaper adverts tendto lead to a permanent state of job seeking.Keywords: Labor market dynamics; Networks;1 IntroductionThe importance of non-market interactions has been increasingly recognized in a variety of contexts.In the ﬁeld of labor economics, there exists vast theoretical literature that examines the role ofsocial networks in labor market dynamics. Calvó-Armengol and Jackson (2004) construct a modelwhere it is shown that if social ties are important then one should observe negative duration ofexit rates from unemployment. Topa (2001) formulates a model of local interactions in the labormarket and concludes that agents are more likely to transmit useful information about jobs if theythemselves are employed, which generates positive spacial correlations of unemployment. In a similarway, Bramoullé and Saint-Paul (2010) argue that a bond between an employed and an unemployedworker increases the unemployed's likelihood of ﬁnding a job, but is less likely to arise than betweentwo employed workers.A recurrent issue in this literature is why ﬁrms would wish to recruit workers through informalchannels. Two main arguments are frequently reported. First, it is inexpensive and social networksoperate as devices to narrow the number of applicants to manageable proportions, rather thanother formal means. Second, they serve as useful screening devices. It is a well established fact insocial network literature that social ties tend to occur among persons with similar attributes (seeGranovetter, 2005). Given a labor market characterized by adverse selection, employers will thussolicit referrals from high-ability employees. Additionally, an employee will refer only well-qualiﬁedapplicants since his reputation might be at stake. Under this assumption, Montgomery (1991)develops a model where it is shown that workers hired through social networks are of higher quality,receive higher wages and have lower rates of quitting.On the empirical side, little work has tried to confront these results with real data. In this paper,we attempt to confront theses ﬁndings with real data taken from the Portuguese Labor Force Survey.We examine the search methods used by job seekers and their labor market state across six quartersthrough a network explicit network structure.12 DataThe Portuguese LFS is a CPS-type household survey conducted by the Instituto Nacional de Esta-tistica (INE). The structure of the survey follows the instructions of Eurostat, making the deﬁnitionsidentical to those in other European countries. It includes around 40 000 individuals quarterly, whichare interviewed for six consecutive quarters, such that each quarter 1/6 of the sample is rotated outand 5/6 of the sample is retained, allowing us to observe the labor force state and other characteristicsin the quarter t− 1 and t for 5/6 of the individuals.The survey reports the strategies used by the respondents to ﬁnd job. These are:11. Contacted public employment oﬃce2. Contacted private employment agency3. Applied to employers directly4. Asked friends, relatives, etc5. Inserted or answered advertisements in newspapers or journals6. Studied advertisements in newspapers or journals7. Took a test, interview or examination8. Looked for land, premises or equipment9. Looked for permits, licences, ﬁnancial resources.The individuals may report more than one job search method in each of the six quarters. Thestructure of this database allows us to track during six quarters the method or the combination ofjob search methods . We used the ﬁrst wave of 2011.3 MethodThe information on each individual is coded by a string of 10 bits where each bit identies the choice(by the individual) of a given strategy and the bit position identies the strategy itself. For instance,the bit string:0 0 0 0 1 1 1 0 0 0represents an individual who adopted the following strategies:• Inserted or answered advertisements in newspapers or journals• Studied advertisements in newspapers or journals• Took a test, interview or examinationEvery existing strategy is consider a specic state of the labor market. The dynamics of the model ischaracterized by the evolution of the indi- vidual strategies (market states) along successive quarters.The basic driver of the dynamics of the model is twofold:• Following the characteristics of the transitions between the labor market states.• Characterizing the matching between individual strategies.1See Eurostat (2013), pp.24-25.20 100 200 300 400 500 600 700 800 900 100001020304050607080Distribution of In−coming Links 648 96 252512768Figure 3.1: Distribution of the in-coming links across quarters4 ResultsThe main results are:• As Figure 3.1 depicts, during the six quarters the following in-coming states have the higherfrequency: 512 (employed not searching), 768 (employed still searching through a public oﬃce)and 896 (employed still searching through a public oﬃce or a private agency).• Those who use more formal means (methods 1 and 5 to 9) seem more likely to move to a stablestate: employment without being simultaneously searching for another job (Figure 4.2).• In turn, the usage of the previous methods jointly with contacts with a private employmentagency (method 2) leaves workers in a state of employment but still seeking job through apublic employment oﬃce (Figure 4.3).• Similarly, the usage of informal contacts (method 4) and newspaper adverts (method 5) leadsto state of employment and simultaneous job search through a public oﬃce and a privateagency (Figure 4.4).3All    1   2   3   4   5   6   7   8  10  11  12  13  14  15  16  18  20  22  23  24  26  28  30  31  32  40  44  45  46  48  52  56  58  59  60  62  63  64  72  80  88  94  96 104 110 112 120 124 126 127 128 144 176 180 188 190 244 248 252 254 256 262 278 352 360 376 384 480 488 496 504 508 511 512 515 543 551 557 575 768 770 780 783 799 880 896 927 928 944 960 976 9921008Figure 4.1: Network of transitions between labor force states and job search methods across the sixquarters.   1   2   3   4   5   6   7   8  10  11  14  15  20  22  23  27  28  30  33  41  44  45  59  61  63  78 262 263 264 285 287 512 518 526 529 539 543 551 555 575  771  774 775 777 783 799 811 831 903 919 9711018DEFigure 4.2: The focus (node 512) is the second link with a higher frequency (Figure 3.1) and denotesemployed individuals not searching for a job, which can be viewed as a stable state of employment.To move to this state, the job search methods more eﬃcient seem to be 1 and 5 to 9.4   1   3   4   7   8  13  14  15  22  23  31  48 160 203 271 407 499 507 768 769 783 791 799 831 871 896  902  927 95510081009101110131015DEFigure 4.3: The focus (node 768) is the second link with a higher frequency (Figure 3.1) and denotesemployed individuals that keep searching for a job through a public employment oﬃce. Besidesthe previous methods, method 2 (contacted private employment agency) emerges in high-intensitypreceding states.  11  12  15 411 447 499 500 507 508 511 8961008100910101015DE,Figure 4.4: The focus (node 896) is the third link with a higher frequency (Figure 3.1) and denotesemployed individuals that keep searching for a job through a public employment oﬃce or a privateemployment agency. The job search methods preceding this state are mainly method 4 (informalcontacts) and method 5 (advertisements in newspapers or journals).55 Discussion and conclusionsPrevious research highlighted the importance of informal contacts in job search. We construct adatabase from the ﬁrst 2011 wave of the Portuguese Labor Force Survey and analyze the transitionsbetween labor market states and job search methods during six quarters.In Portugal, the individuals who use more formal job search methods are more likely to get astable state of employment, while contacts informal contacts, private agencies or newspaper advertstend to lead to a permanent state of job seeking.Further research should be done to clarify certain remaining issues. It would be worthwhile:• analyze the data from the youth cohorts;• study the relative important of each method among occupations and educational level ofworkers.Continued interdisciplinary research on job search methods and networks might provide new insightof labor market mechanisms.ReferencesBramoullé, Y., Saint-Paul, G., 2010. Social networks and labor market transitions. Labour Economics17 (1), 188  195.Calvó-Armengol, A., Jackson, M. O., June 2004. The eﬀects of social networks on employment andinequality. The American Economic Review 94 (3), 426454.Eurostat, November 2013. EU Labour Force Survey database User Guide.Granovetter, M., Winter 2005. The impact of social structure on economic outcomes. The Journalof Economic Perspectives 19 (1), 3350.Montgomery, J. D., 1991. Social networks and labor-market outcomes: Toward an economic analysis.The American Economic Review 81, 14081418.Topa, G., April 2001. Social interactions, local spillovers, and unemployment. The Review of Eco-nomic Studies 68 (2), 261295.6

The dynamics of innovation in job search strategies :  some empirical findings

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The dynamics of innovation in job search strategies : some empirical findings

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