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Social Interactions, Thresholds, and Unemployment in Neighborhoods

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Brian Krauth (Simon Fraser University)

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Abstract

This paper finds that the predicted unemployment rate in a community increases dramatically when the fraction of neighborhood residents with college degrees drops below twenty percent. This threshold behavior provides empirical support for ``epidemic'' theories of inner-city unemployment. Using a structural model with unobserved neighborhood heterogeneity in productivity due to sorting, I show that sorting alone cannot generate the observed thresholds without also implying an implausible shape for the wage distribution. This provides further evidence that true social interaction effects are driving the earlier results.

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Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1638.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:1638

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer. [Downloadable!] (restricted)
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  2. Glaeser, Edward L & Sacerdote, Bruce & Scheinkman, Jose A, 1996. "Crime and Social Interactions," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 507-48, May. [Downloadable!] (restricted)
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  3. William A. Brock & Steven N. Durlauf, 1995. "Discrete Choice with Social Interactions I: Theory," Working Papers 95-10-084, Santa Fe Institute.
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  4. Evans, William N & Oates, Wallace E & Schwab, Robert M, 1992. "Measuring Peer Group Effects: A Study of Teenage Behavior," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 966-91, October. [Downloadable!] (restricted)
  5. Lisa Finneran & Morgan Kelly, 1996. "Labour Market Networks, Underclasses and Inequality," Working Papers 96/21, University College Dublin, Economics Department. [Downloadable!]
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  6. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
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  7. Durlauf, Steven N, 1996. " A Theory of Persistent Income Inequality," Journal of Economic Growth, Springer, vol. 1(1), pages 75-93, March.
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  8. repec:att:wimass:199521 is not listed on IDEAS
  9. Koning, Pierre & Ridder, Geert & van den Berg, Gerard J, 1995. "Structural and Frictional Unemployment in an Equilibrium Search Model with Heterogeneous Agents," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(S), pages S133-51, Suppl. De. [Downloadable!] (restricted)
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  10. Johnson, G.E. & Layard, P.R.G., 1987. "The natural rate of unemployment: Explanation and policy," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 16, pages 921-999 Elsevier. [Downloadable!] (restricted)
  11. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  12. Topa, Giorgio, 1997. "Social Interactions, Local Spillovers and Unemployment," Working Papers 97-17, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
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  13. Brian Krauth, 1998. "A Dynamic Model of Job Networks and Persistent Inequality," Research in Economics 98-06-049e, Santa Fe Institute. [Downloadable!]
  14. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Blackwell Publishing, vol. 60(3), pages 531-42, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Yannis M. Ioannides & Linda Datcher Loury, 2002. "Job Information Networks, Neighborhood Effects and Inequality," Discussion Papers Series, Department of Economics, Tufts University 0217, Department of Economics, Tufts University. [Downloadable!]
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  2. Bruce A. Weinberg, 2007. "Social Interactions with Endogenous Associations," NBER Working Papers 13038, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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