Matching in the Labor Market. Formal Market and Referrals

Student: Notkin Roman

Supervisor: Steven Kivinen

Faculty: International College of Economics and Finance

Educational Programme: Double degree programme in Economics of the NRU HSE and the University of London (Bachelor)

Year of Graduation: 2020

I use General search model with: the original Stingler model of nonsequential search and noisy search when agent learns uncertain number of prices to show the effect of adding non-pecuniary benefits. It occurred that this factor became to play crucial role in the labor market model. Firms are assumed to be non-homogeneous in terms of non-pecuniary benefits. This is a two-stage model which separates labor market in two parts: referrals and formal labor market. My findings suggest that due to asymmetric information and difference in non-pecuniary benefits in the market of referrals the equilibrium wage is lower than on the formal market. These results contrast with existing literature which suggests that recommended workers are paid more than workers came from the formal market.

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