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Neighborhood effects on unemployment ? A test à la Altonji

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Author Info

  • Claire Dujardin

    ()
    (CORE - Center for Operations Research and Econometrics - Université Catholique de Louvain)

  • Florence Goffette-Nagot

    ()
    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

Abstract

The aim of this paper is to test for the influence of neighborhood deprivation on individual unemployment probability in the case of 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 the gender composition of household's children and the spouse's workplace. Second, we use the methodology proposed by Altonji et al. (2005), that in our case consists in making hypotheses as to the correlation between the unobservables that determine unemployment and the unobservables that influence the 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 also show that a correlation of the unobservables as low as ten percent of the correlation of observables is sufficient to explain the positive neighborhood effect that is observed when endogeneity is not accounted for.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00435119.

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Date of creation: 2010
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Publication status: Published, Regional Science and Urban Economics, 2010, 40, 6, pp. 380-396
Handle: RePEc:hal:journl:halshs-00435119

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Keywords: Neighborhood effects ; unemployment ; simultaneous probit models ; instrumental variables ; selection on unobservables;

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Cited by:
  1. 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.
  2. Vincent Boitier, 2014. "Unemployment Dispersion and City Configurations: Beyond the Bid Rent Theory," Working Papers hal-00999559, HAL.
  3. Thomas Horvath & Peter Huber, 2013. "The impact of networks, segregation and diversity on migrants' labour market integration," WWWforEurope Working Papers series 22, WWWforEurope.
  4. Bauer, Thomas K. & Fertig, Michael & Vorell, Matthias, 2011. "Neighborhood Effects and Individual Unemployment," IZA Discussion Papers 6040, Institute for the Study of Labor (IZA).
  5. 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.

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