What’s the Value of Social Capital?A Within-Person Job Offer and Choice Test

Abstract

Whether and how social capital derived through social ties creates value has animated substantial research in sociology, economics, and political science. Amongst the most active lines of research on the matter considers whether social ties improve labor market outcomes. Two primary analytical approaches have been employed to this end. One considers whether social ties help individuals find work. A second approach considers whether social ties lead to jobs with better attributes (e.g., pay), contingent on finding work. Sociologists are generally inclined to believe that social ties have a causal impact on labor market outcomes—that is, it is “who you know that counts” to some degree. However, the evidence informing this belief is circumstantial and often inconsistent. This is particularly true with respect to the second approach concerning whether the use of social ties leads to jobs with more favorable characteristics. In this research we propose and test a model that addresses prior criticisms of the latter approach by leveraging unique data on contemporaneous job search with detailed information about job search channels and offer characteristics. Contrary to conventional wisdom, we find that search through social networks typically results in job offers with lower total compensation. However, net of compensation, job offers derived through alumni contacts (weak ties) as well as thorough family and friends are more likely accepted.