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Neighborhood quality and labor market outcomes: Evidence from quasi-random neighborhood assignment of immigrants

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  • Damm, Anna Piil

Abstract

Settlement in a socially deprived neighborhood may hamper individual labor market outcomes because of lack of employed or highly skilled contacts. I investigate this hypothesis by exploiting a unique natural experiment that occurred between 1986 and 1998 when refugee immigrants to Denmark were assigned to municipalities quasi-randomly, which successfully addresses the methodological problem of endogenous neighborhood selection. I show that individuals sort into neighborhoods. Taking account of location sorting, living in a socially deprived neighborhood does not affect labor market outcomes of refugee men. Their labor market outcomes are also not affected by the overall employment rate and the overall average skill level in the neighborhood. However, an increase in the average skill level of non-Western immigrant men living in the neighborhood raises their employment probability, while an increase in the employment rate of co-national men living in the neighborhood raises their real annual earnings. This provides quasi-experimental evidence that residence-based job information networks are ethnically stratified.

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  • Damm, Anna Piil, 2014. "Neighborhood quality and labor market outcomes: Evidence from quasi-random neighborhood assignment of immigrants," Journal of Urban Economics, Elsevier, vol. 79(C), pages 139-166.
  • Handle: RePEc:eee:juecon:v:79:y:2014:i:c:p:139-166
    DOI: 10.1016/j.jue.2013.08.004
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    More about this item

    Keywords

    Residential job search networks; Referral; Contacts; Neighborhood quality; Labor market outcomes;
    All these keywords.

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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