Job Referrals vs Employee Referrals

Title: Job referrals vs. Employee referrals

Abstract: The paper presents a theoretical model that examines the behavior of workers and firms in the labor market in the presence of referrals. The model distinguishes between job referrals (a method of job search using social connections between workers) and employee referrals (an HR practice of firms to attract new job candidates) and asserts that every connected job candidate will utilize either job or employee referrals in their job search process. It provides conditions for employee referral occurrence, suggesting that such referrals happen only when both a job candidate and an incumbent worker are perceived to be highly qualified. The model also postulates that labor market outcomes, such as wages and tenure, depend on the types of referrals used, highlighting the importance of differentiating between job referrals and employee referrals in further theoretical and empirical research.