Facing the Faceless - On the Determinants and Effectiveness of Social Capital in the Labour Market

Recruitment, which is the attraction and selection of qualified employees, is one of the major challenges of firms. In practice, both employers and employees lack relevant information about each other at the risk of a poor person-organisation (P-O) and/or person-job (P-J) fit. To overcome these mutual information asymmetries, labour market participants could utilise their social capital in the form of personal contacts to fill vacancies or find new jobs. In analogy to the concept of human capital as the embodiment of knowledge in an individual, Coleman (1988) defines social capital as the “structure of relations between actors and among actors”. Social capital could therefore serve as a superior means in the job search or recruitment process for both sides of the labour market compared to other search channels (e.g. printed or online adverts, employment agencies). Albeit empirical research has addressed the relation between post-hire outcomes and recruitment channels, there are certain gaps in the literature this dissertation aims to fill. Based on data on the German labour market derived from the Socio-Economic Panel (SOEP), this dissertation investigates the following aspects: First, determinants of recruitment channel usage are analysed. Second, outcomes of finding a job through social ties, e.g. wages, job satisfaction, and turnover, are investigated. Third, these two steps are integrated into one model to account for selection effects since finding a job through a given channel is unlikely to be random. In addition to this, it is elucidated whether personality traits (Big Five, locus of control, reciprocity) affect finding a job via social ties as well as post-hire outcomes. Fourth, search effort and outcomes of this search of unemployed job seekers is investigated. Finally, leisure time activities are interpreted as determinants of social capital generation and labour market outcomes of these activities are estimated.


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