The role of networks in labor markets

Abstract

Networks of relationships play an important role in the social and economic operation of the labor market. Social connections have been shown to be crucial in influencing the transition and efficiency in the labor market because they can quickly spread information over large segments of society. In particular in “small world” networks everyone can connect to others through very few intermediaries and information can spread far and fast over such a small-world network. The first chapter of this dissertation starts with the formal elements of social network analysis and graph theory. It then provides an overview of the emerging literature on models of small worlds. Networks characterized by very small characteristic path lengths, yet high clustering coefficients, are said to exhibit the small-world phenomenon. Since interactions or links in the academic labor market are observed easier than other labor markets, the second chapter investigates the labor market for academic economists from a social network perspective. The sample includes the top two hundred economics departments in the world and provides a separate analysis of the subset pertaining to North America. The data indicates the stronger links between higher ranked universities than between the universities in the higher and lower ranked universities. The obvious pattern of interaction in the network is that the top-ranked grantors place their Ph.D. economists mostly in group ranked below them. The small-world properties of this network are examined in the third chapter. The data confirms the small-world phenomenon in the economics academic network. Any two ranked universities can be connected through approximately three links only. Although it is shown that there is inequality in the placement of Ph.D. students, there are many centers of connections in the network. However, most of the influential universities in terms of centrality of the network are not the ones influential in granting doctoral degrees.