Limited network connections and the distribution of wages
By: Kenneth J. Arrow and Ron Borzekowski.
Contributors: Borzekowski, Ron.
Series: Finance and economics discussion series ;; 2004-41; Finance and economics discussion series (Online) ;; 2004-41.
Publisher: Federal Reserve Board
Published: 2004
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Subjects: Wages -- United States.; Income distribution -- United States.; Social networks -- United States.
Description: "It is well-known that 50% or more of all jobs are obtained through informal channels i.e.  connections to family or friends.  As well, statistical studies show that observable individual factors account for only about 50% of the very wide variation in earnings.  We seek to explain these two facts by assuming that the linking of workers and firms is mediated by limited network connections.  The model implies that essentially similar workers can have markedly different wages and further that the inequality of wages is partly explained by variations in the sizes of workers' networks.  Our results indicate that differences in the number of ties can induce substantial inequality and can explain roughly 15% of the unexplained variation in wages.  We also show that reasonable differences in the average number of links between blacks and whites can explain the disparity in black and white income distributions"--Federal Reserve Board web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 8/11/2004.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.