The causal effect of informal job search on wage and job satisfaction: evidence from Egypt and Jordan using random forest method

PurposeThis study aims to examine the impact of finding a job through family and friend contacts on employees' wages and job satisfaction.Design/methodology/approachThis study uses machine learning techniques in economics to estimate the causal effect of being hired through informal contacts on wages and job satisfaction using cross-sectional data from the Higher Education Graduates Survey 2012 (HEGS, 2012) in Egypt and Jordan.FindingsThe author's results confirm that negative and positive consequences are likely to occur. In Egypt, a wage penalty of 28% is estimated in the starting wage, but the impact diminishes in the last wage. By contrast, in Jordan, no penalty is captured in the starting wage, but a premium of 10% is estimated in the last wage. Job satisfaction is negatively affected by the penalty in the starting wage.Social implicationsJob market search methods that allow for professional job referrals, facilitate more efficient information transfer between job-seekers and employers and provide opportunities for job-seekers with weak social capital should be implemented to lower dependence on informal search methods.Originality/valueThe research provides comprehensive evidence about finding a job through informal contact with employees' well-being. The consequences of finding a job using family and friends' contacts, whether positive or negative, cannot be ignored. Future research could benefit from the findings of this study.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-05-2022-0318.