The emergence of social structure: Employer information networks in an experimental labor market

We use laboratory experiments to investigate how and under what circumstances networks amongst employers emerge that facilitate information sharing about the trustworthiness of job candidates, when worker opportunism is possible. The experimental design allows us to distinguish between mechanisms underlying the relations amongst employers and those between employers and workers. The data show that substantial information sharing within employer networks emerges. Two types of informa­tion networks are observed. One consists of ‘anonymity networks’ where information is anony­mously and voluntarily provided as a collective good for all employers to use. The other type is a ‘reciprocity network’ where information sharing is driven by the rewarding of previously given information by the requestor. Emerging reciprocity networks tend to crowd out anonymity networks. Both types of network enable employers to recruit trustworthy workers, thereby increasing the surplus from trade, which benefits both the employers and workers involved. However, restricted access to the networks may increase social inequality amongst employers. Social inequality amongst workers may occur as a consequence of limited access to certain jobs.