We assess the impact of social connections on the sorting of workers to firms (and the presumption that connections increase sorting inequality) by first examining the distribution of displaced workers’ social connections to employed workers and their firms; using Swedish data, we measure multiple types of networks, of both the strong and weak sort (family, former co-worker, former classmate, current neighbor); we estimate an AKM decomposition (to assess sorting inequality). Then, we examine the causal impact of connections on hiring for these displaced workers and how connections and their strength affect sorting inequality.

Finally, we look at how connections affect sorting for all job-to-job movers.

In this way, we find that our measured social connections display homophily: positive sorting in terms of earnings capacity; high-wage workers are connected to high-wage workers who tend to be employed by high-wage firms. Thus we can conclude that social connections matter when looking for jobs.