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Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes

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Author Info
Patrick Bayer () (Economic Growth Center, Yale University)
Stephen L. Ross (Economics Department, University of Connecticut)
Giorgio Topa (Federal Reserve Bank of New York)

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Abstract

We use a novel dataset and research design to empirically detect the effect of social interactions among neighbors on labor market outcomes. Specifically, using Census data that characterize residential and employment locations down to the city block, we examine whether individuals residing in the same block are more likely to work together than those in nearby blocks. We find evidence of significant social interactions operating at the block level: residing on the same versus nearby blocks increases the probability of working together by over 33 percent. The results also indicate that this referral effect is stronger when individuals are similar in sociodemographic characteristics (e.g., both have children of similar ages) and when at least one individual is well attached to the labor market. These findings are robust across various specifications intended to address concerns related to sorting and reverse causation. Further, having determined the characteristics of a pair of individuals that lead to an especially strong referral effect, we provide evidence that the increased availability of neighborhood referrals has a significant impact on a wide range of labor market outcomes including employment and wages.

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Publisher Info
Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 927.

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Length: 35 pages
Date of creation: Nov 2005
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Handle: RePEc:egc:wpaper:927

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Related research
Keywords: Neighborhood Effects; Job Referrals; Social Interactions; Social Interactions; Social Networks; Labor Supply;

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Find related papers by JEL classification:
J0 - Labor and Demographic Economics - - General
J2 - Labor and Demographic Economics - - Demand and Supply of Labor
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies
R0 - Urban, Rural, and Regional Economics - - General

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