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Neighborhood effects on unemployment?: A test à la Altonji

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  • Dujardin, Claire
  • Goffette-Nagot, Florence

Abstract

This paper aims to test for the influence of neighborhood deprivation on individual unemployment probability, in Lyon (France). We estimate a bivariate probit model of unemployment and location in a deprived neighborhood. Our identification strategy is twofold. First, we instrument neighborhood type by spouse's workplace and gender of the children in the household. Second, we use the methodology proposed by Altonji et al. (2005), which in our case consists of hypothesizing about the correlation between the unobservables that determine unemployment and the unobservables that influence selection into neighborhood types. Our results show that the effect of neighborhood deprivation is not significantly different from zero in the bivariate probit with exclusion restrictions. We show also that correlation among the unobservables as low as 6% of the correlation of observables is sufficient to explain the positive neighborhood effect observed when endogeneity is not taken into account.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 40 (2010)
Issue (Month): 6 (November)
Pages: 380-396

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Handle: RePEc:eee:regeco:v:40:y:2010:i:6:p:380-396

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Keywords: Neighborhood effects Unemployment Simultaneous probit models Instrumental variables Selection on unobservables;

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Cited by:
  1. Bauer, Thomas K. & Fertig, Michael & Vorell, Matthias, 2011. "Neighborhood Effects and Individual Unemployment," IZA Discussion Papers 6040, Institute for the Study of Labor (IZA).
  2. Rud, I. & Van Klaveren, C. & Groot, W. and Maassen van den Brink, H., 2012. "The externalities of crime: The effect of criminal involvement of parents on the educational attainment of their children," Working Papers 44, Top Institute for Evidence Based Education Research.
  3. Vincent Boitier, 2014. "Unemployment Dispersion and City Configurations: Beyond the Bid Rent Theory," Working Papers hal-00999559, HAL.
  4. Buly A. Cardak & Joe Vecci, 2013. "Catholic School Effectiveness in Australia: A Reassessment Using Selection on Observed and Unobserved Variables," Working Papers 2013.05, School of Economics, La Trobe University.
  5. Thomas Horvath & Peter Huber, 2013. "The impact of networks, segregation and diversity on migrants' labour market integration," WWWforEurope Working Papers series 22, WWWforEurope.

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