We develop a network model of occupational segregation between social groups divided along gender or racial dimensions, generated by the existence of positive assortative matching among individuals from the same group. If referrals are important for job search, then expected homophily in the structure of job contact networks induces different career choices for individuals from different social groups . This further translates into stable  occupational segregation equilibria in the labor market. We derive conditions for wage and unemployment inequality in the segregation equilibria and characterize both the first and the second best social welfare optima . We find that utilitarian socially optimal policies always involve segregation, but that integration policies are justifiable by additional distributional concerns. Our analysis suggests that social interaction through homophilous job referral networks is an important channel for the propagation and persistence of gender and racial inequalities in the labour market , complementary to classical theories such as taste or statistical discrimination.
We propose an equilibrium interaction model of occupational segregation and labor market inequality between two social groups, generated exclusively through the documented tendency to refer informal job seekers of identical "social color". The expected social color homophily in job referrals strategically induces distinct career choices for individuals from different social groups , which further translates into stable partial occupational segregation equilibria with sustained wage and employment inequality -- in line with observed patterns of racial or gender labor market disparities. Supporting the qualitative analysis with a calibration and simulation exercise, we furthermore show that both first and second best utilitarian social optima entail segregation, any integration policy requiring explicit distributional concerns. Our framework highlights that the mere social interaction through homophilous contact networks can be a pivotal channel for the propagation and persistence of gender and racial labor market gaps , complementary to long studied mechanisms such as taste or statistical discrimination.
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develop a network
propose an equilibrium interaction
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between social groups divided along gender or racial dimensions, generated by the existence of positive assortative matching among individuals from the same group. If referrals are important for job search, then expected homophily in the structure of job contact networks induces different
and labor market inequality between two social groups, generated exclusively through the documented tendency to refer informal job seekers of identical "social color". The expected social color homophily in job referrals strategically induces distinct
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. This
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partial
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in the labor market. We derive conditions for wage and unemployment inequality in the segregation equilibria and characterize both the first and the second best social welfare optima . We find that utilitarian socially optimal policies always involve segregation, but that integration policies are justifiable by additional
with sustained wage and employment inequality -- in line with observed patterns of racial or gender labor market disparities. Supporting the qualitative analysis with a calibration and simulation exercise, we furthermore show that both first and second best utilitarian social optima entail segregation, any integration policy requiring explicit
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analysis suggests that
framework highlights that the mere
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job referral networks is an important
contact networks can be a pivotal
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inequalities in the labour market
labor market gaps
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classical theories
long studied mechanisms