Social Interactions, Thresholds, and Unemployment in Neighborhoods
AbstractThis 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 a wage distribution which is inconsistent with that observed in microeconomic data. Social interaction effects are thus a necessary element in any suitable explanation for the data.
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Bibliographic InfoPaper provided by Department of Economics, Simon Fraser University in its series Discussion Papers with number dp00-12.
Length: 33 pages
Date of creation: 2000
Date of revision: 28 Mar 2000
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Postal: Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
Web page: http://www.sfu.ca/economics.html
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Postal: Working Paper Coordinator, Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
Other versions of this item:
- Brian Krauth, 2000. "Social Interactions, Thresholds, and Unemployment in Neighborhoods," Econometric Society World Congress 2000 Contributed Papers 1638, Econometric Society.
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
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