Informal networks, spatial mobility and overeducation in the Italian labour market

Abstract

This paper investigates the impact of the use of the informal recruitment channel (relatives and friends) on the probability of being overeducated in the Italian labour market, taking into account its impact on spatial flexibility. We argue that the informal recruitment channel may increase job–education mismatches both directly (by inducing some workers to undertake careers in industries, professions, or firms where their comparative productive advantage is not fully exploited) and indirectly by negatively affecting spatial flexibility. In order to test these hypotheses, we estimate probit models with self-selection using ISFOL Plus survey data providing information on labour market entry channels, job-related migration and a “subjective” measure of overeducation. We find a robust positive impact of the use of the informal channel on overeducation and a robust negative effect of the use of this channel on migration. On the other hand, we find that migration reduces overeducation only in some geographical areas of the Italian territory. Overall, these findings suggest that a reform of employment services in Italy is needed in order to favour spatial flexibility, reduce the use of the informal channel and enhance the quality of job–education matches.