Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/171042 
Year of Publication: 
2017
Series/Report no.: 
IZA Discussion Papers No. 11058
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
The use of informal job search method is prevalent in many countries. There is, however, no consensus in the literature on whether it actually matters for wages, and if it does, what are the underlying mechanisms. We empirically examine these issues specifically for rural migrants in urban China, a country where one of the largest domestic migration in human history has occurred over the past decades. We find that there exists a significant wage penalty for those migrant workers who have conducted their search through informal channels, despite their popularity. Our further analysis suggests two potential reasons for the wage penalty: 1) the informal job search sends a negative signal (of workers' inability to successfully find a job in a competitive market) to potential employers, resulting in lower wages; and 2) there exists a trade-off between wages and search efficiency for quicker entry into local labor market. We also find some evidence that the informal job search may lead to low-skilled jobs with lower wages. We do not find strong evidence supporting alternative explanations.
Subjects: 
social network
rural-urban migrants
wage
search friction
information asymmetry
chinese economy
JEL: 
J31
J64
P2
P5
Document Type: 
Working Paper

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