Job search is typically not undertaken in isolation. Instead, job-seekers are aware of the job search activity of friends, colleagues and acquaintances, and information about others' job search successes and failures is often available. We know from social psychology that such social comparisons can affect how humans feel and behave. People care about their status and evaluate it by comparing themselves with others. People who are uncertain about what decision to make are influenced by the observed behaviour of others. Thus, job-seekers may use the decisions and outcomes of others to decide whether or not to accept a job offer. This suggests that job search outcomes (such as unemployment or wages) may be correlated within social groups. For example, job-seekers who are in a social group in which few others have a job may feel less pressure to find a job themselves.
Identifying social comparison effects from observational data on job-seekers is difficult because social groups are not created randomly. The authors therefore use a laboratory experiment in which subjects receive sequential wage offers and must choose whether to accept a particular offer or reject it in the hope of receiving a higher offer later on. They then vary the extent to which subjects receive information from randomly selected partners. The authors find that search behaviour is different if subjects are able to make social comparisons. When a subject learns that their partner has accepted a high wage offer, the subject tends to become more selective in deciding whether to accept their own wage offers. When a subject learns that their partner has accepted a low wage offer, the subject becomes less selective. They also observe a learning eﬀect: subjects who have been paired with a more patient and successful partner are more selective in the next task, which tends to increase their expected earnings.
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Jingcheng Fu, Martin Sefton and Richard Upward
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Posted on Monday 12th June 2017