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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
Stephen Ross
Giorgio Topa

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Abstract

We use a novel 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 socio-demographic 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 labor force participation, hours and earnings.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11019.

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Date of creation: Jan 2005
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Handle: RePEc:nbr:nberwo:11019

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Find related papers by JEL classification:
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
R14 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Land Use Patterns

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