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Social Networks, Employment and Worker Discouragement: Evidence from South Africa

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  • Susan Godlonton
  • Justine Burns

    ()
    (School of Economics, University of Cape Town)

Abstract

Social networks are increasingly being recognised as having an important influence on labour market outcomes, since they facilitate the exchange of job related information. Access to information about job opportunities as well as perceptions about the buoyancy of the labour market depend critically on the social structures and the social networks to which labour market participants belong. In this paper, we examine the impact of information externalities generated through network membership on labour market status. Using Census data from South Africa, a country characterised by high levels of unemployment and worker discouragement, we adopt an econometric approach that aims to minimise the problems of omitted variable bias that have plagued many previous studies of the impact of social networks. Our results suggest that social networks may enhance employment probabilities by an additional 3 to 9%, and that failure to adequately control for omitted variables would lead to substantial over-estimates of the network co-efficient. Social networks affect both employment probabilities and worker discouragement, and are particularly important for individuals residing in rural areas, those with disabilities, and those who are black or female.

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Bibliographic Info

Paper provided by Southern Africa Labour and Development Research Unit, University of Cape Town in its series SALDRU Working Papers with number 6.

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Date of creation: Oct 2006
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Handle: RePEc:ldr:wpaper:6

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References

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  1. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 531-42, July.
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  7. Geeta Kingdon & John Knight, 2000. "Are Searching and Non-searching Unemployment Distinct States when Unemployment is High? The Case of South Africa," Economics Series Working Papers WPS/2000-02, University of Oxford, Department of Economics.
  8. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," NBER Working Papers 7580, National Bureau of Economic Research, Inc.
  9. Stephan Klasen & Ingrid Woolard, 2009. "Surviving Unemployment Without State Support: Unemployment and Household Formation in South Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 18(1), pages 1-51, January.
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  12. Timothy G. Conley & Christopher R. Udry, 2005. "Learning about a new technology: pineapple in Ghana," Proceedings, Federal Reserve Bank of San Francisco.
  13. Rees, Albert, 1986. "An Essay on Youth Joblessness," Journal of Economic Literature, American Economic Association, vol. 24(2), pages 613-28, June.
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  16. Matt Jackson, 2003. "The Effects of Social Networks on Employment and Inequality," Theory workshop papers 658612000000000032, UCLA Department of Economics.
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Cited by:
  1. Godlonton, Susan, 2014. "Employment risk and job-seeker performance:," IFPRI discussion papers 1332, International Food Policy Research Institute (IFPRI).
  2. Gürbüz, Ayça Akarcay & Polat, Sezgin & Ulus, Mustafa, 2013. "In Limbo: Exploring transition to discouragement," GIAM Working Papers 13-4, Galatasaray University Economic Research Center.
  3. KUEPIE Mathias & TENIKUE Michel & WALTHER Olivier, 2014. "Small businesses performance in West African border regions: Do social networks pay off?," CEPS/INSTEAD Working Paper Series 2014-06, CEPS/INSTEAD.
  4. Miracle Ntuli & Prudence Kwenda, 2013. "Labour Unions and Wage Inequality Among African Men in South Africa," Working Papers 13159, University of Cape Town, Development Policy Research Unit.

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