Do Job Seekers Benefit from Contacts? A Direct Test with Contemporaneous Searches

Although it is intuitively plausible that a job seeker benefits by using contacts in her job search, the literature is plagued by theoretical disagreements and inconclusive empirical evidence. Single‐firm studies consistently find that job seekers applying through referrals achieve better labor‐market outcomes than job seekers applying without referrals, but the evidence from job‐seeker studies is mixed. To solve this puzzle, we clarify the distinction between having social capital and using contacts as a search method. We present theoretical reasons to suggest that the lack of an association between a job seeker's social capital and whether or not she uses social networks to search for a job should not be taken to imply that job seekers who use social networks to search for jobs do not benefit from using contacts. We exploit a strategic research setting, the school‐to‐work transition of 291 university graduates who engaged in 3,112 contemporaneous job searches, to show that although a job seeker's social capital may not affect whether or not she uses contacts to search for a job, using contacts as a job‐search method does improve her job‐search outcomes. We conclude by discussing the implications of our findings for the literature on job search and social networks.