We develop a model where workers, anticipating the risk of becoming unemployed, invest in connections in order to access information about available jobs that other workers may have. The investment in connections is high when the job separation rate in the labor market is moderate, whereas it is low for either low or high levels of job separation rate. The equilibrium response of network investment to changes in the labor market conditions generates novel empirical predictions. In particular, the probability that a worker finds a new job via his connections increases in the separation rate when the separation rate is low, while it decreases when the separation rate is high. These predictions are supported by the empirical patterns that we document for the UK labor market.

Exploiting the richness of the Danish register data on individuals and companies, we are able to provide an overall assessment of the assortative matching patterns arising in the period 1996-2005 controlling for firms and individual characteristics. We find strong differences between men and women in assortativity. While positive assortative matching in job-to-job transitions emerges for good female workers, good male workers are more likely to be promoted. These differences are not present in female friendly firms which have high profits and where good female workers tend to find jobs. Complementary analysis on job-to-unemployment and job-to-self-employment transitions reveals a lower employer's willingness to retain women. Overall, we find strong evidence of glass-ceilings in certain firms preventing women to climb the carrier ladder and pushing them to look for better jobs offered by more female friendly firms.

This paper studies how search externalities and wage bargaining distort vacancy creation and the allocation of workers to jobs in markets with two-sided heterogeneity. To do so, I propose a model of a frictional labor market where heterogeneous workers decide which job to look for and firms decide which technology to adopt. In equilibrium, there is perfect segmentation across sectors, which is determined by a unique threshold of workers’ productivity. This threshold is inefficient due to participation and composition externalities. The Pigouvian tax scheme that decentralizes optimal sorting shows that these externalities have opposite signs. Furthermore, their relative strength depends on the distribution of workers’ skills, so that when there are many (few) skilled workers, too many (few) high technology jobs are created.