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The Effects of Social Networks on Employment and Inequality

  • Antoni Calvó-Armengol
  • Matthew O. Jackson

We develop a model where agents obtain information about job opportunities through an explicitly modeled network of social contacts. We show that employment is positively correlated across time and agents. Moreover, unemployment exhibits duration dependence: the probability of obtaining a job decreases in the length of time that an agent has been unemployed. Finally, we examine inequality between two groups. If staying in the labor market is costly and one group starts with a worse employment status, then that group's drop-out rate will be higher and their employment prospects will be persistently below that of the other group.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 94 (2004)
Issue (Month): 3 (June)
Pages: 426-454

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Handle: RePEc:aea:aecrev:v:94:y:2004:i:3:p:426-454
Note: DOI: 10.1257/0002828041464542
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