Density, social networks and job search methods: Theory and application to Egypt

We first develop a theoretical model in which individuals are embedded within a network of social relationships. We show that, conditional on being employed, the probability to find a job through social networks, relative to other search methods, increases and is concave with the size of the network. The effects are stronger for the uneducated. There is however a critical size of the network above which this probability decreases. We then test empirically these theoretical findings for Egypt using the 1998 Labor Market Survey. The empirical evidence supports the predictions of our theoretical model.