VR Working Paper: Ineffectiveness of Social Contacts and Alternate Job Search Methods for Unemployed Youth in Sri Lanka

Sri Lankan youth due to an extended period of unemployment face a lower possibility in future employment and a reduced earning capacity. As a solution, this paper aims to identify an efficient search method.

Emphasis is placed on social contacts, given its popularity as a search method. Social contacts prove inefficient- leading to a 10.0% reduction in unemployment duration with a wage discount of 7.1%. Also, social contacts create a form of stickiness that increases dependency on social contacts and a reluctance to choose other, more efficient search methods in the future. The popularity, inefficiency and stickiness of social contacts are speculated as the probable cause for a large pool of youth to be unemployed over an extended period.

As an alternative to social contacts, internet job search proves to be a more efficient search method reducing unemployment duration by 21.6% with a wage premium of 14.3%.