Village social structure and labor market performance: Evidence from the Philippines

Abstract

This paper studies how social structure — the pattern of social links that connect individuals in a community — affects labor markets. Under competing views on the role of networks, social structures that discourage network hiring could improve or hinder labor market performance. We test these competing views using data on marriage networks in 15,000 villages, combined with labor force survey data. Using regressions analyses and an instrumental variable strategy, we find that individuals living in more socially fragmented villages are less likely to work in family firms, more likely to use formal job search strategies, invest more in education and earn higher wages. Social fragmentation thus discourages network hiring and improves labor market performance. These results survive 384 combinations of robustness checks. We further provide direct evidence against reverse causality.