Working Paper: CEPR ID: DP13786
Authors: Eleonora Patacchini; Panle Barwick; Yanyan Liu; Qi Wu
Abstract: Information is a crucial ingredient in economic decision making. Yet measuring the extent of information exchange among individuals and its effect on economic outcomes is a difficult task. We use the universe of de-identified cellphone usage records from more than one million users in a Chinese city over twelve months to quantify information exchange among individuals and examine the role of referrals -- human carriers of information -- in urban labor markets. We present the first evidence that information flow (measured by call volume) correlates strongly with worker flows, a pattern that persists at different levels of geographic aggregation. Condition on information flow, socioeconomic diversity in information sources (social contacts), especially that associated with the working population, is crucial and helps to predict worker flows. We supplement our phone records with auxiliary data sets on residential housing prices, job postings, and firm attributes from administrative data. Information passed on through referrals is valuable: referred jobs are associated with higher monetary gains, a higher likelihood to transition from part-time to full-time, reduced commuting time, and a higher probability of entering desirable jobs. Referral information is more valuable for young workers, people switching jobs from suburbs to the inner city, and those changing their industrial sector. Firms receiving referrals are more likely to have successful recruits and experience faster growth.
Keywords: information; mobile communication; urban labor market; social networks; entropy
JEL Codes: R23; J60; L15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Information flow, measured by call volume (L96) | worker flows (J69) |
| Information diversity (D80) | worker flows (J69) |
| Referrals (L84) | labor market outcomes (J48) |
| Referrals (L84) | wages, job transitions, and commutes (J31) |
| Firms hiring through social networks (M51) | recruitment and growth (O49) |