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Why do firms hire using referrals? Evidence from Bangladeshi Garment Factories,’ Unpublished manuscript (2010)
| Citations: | 14 - 2 self |
BibTeX
@MISC{Heath10whydo,
author = {Rachel Heath and Jel Codes O and Dean Karlan and Fahad Khalil and Mark Klee and Fabian Lange and Jacques Lawarree and Richard Mansfield and Tyler Mccormick and Melanie Morten and Nancy Qian and Gil Shapira and Vis Taraz and Melissa Tartari},
title = {Why do firms hire using referrals? Evidence from Bangladeshi Garment Factories,’ Unpublished manuscript},
year = {2010}
}
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Abstract
I argue that firms use referrals from current workers to mitigate a moral hazard problem. I develop a model in which referrals relax a limited liability constraint by allowing the firm to punish the referral provider if the recipient has low output. I test the model’s predictions using household survey data that I collected in Bangladesh. I can control for correlated wage shocks within a network and correlated unobserved type between the recipient and provider. I reject the testable implications of models in which referrals help firms select unobservably good workers or are solely a non-wage benefit to providers.
