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Social Interactions, Local Spillovers and Unemployment

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  • Giorgio Topa

Abstract

I analyse a model that explicitly incorporates local interactions and allows agents to exchange information about job openings within their social networks. Agents are more likely to be employed if their social contacts are also employed. The model generates a stationary distribution of unemployment that exhibits positive spatial correlations. I estimate the model via an indirect inference procedure, using Census Tract data for Chicago. I find a significantly positive amount of social interactions across neighbouring tracts. The local spillovers are stronger for areas with less educated workers and higher fractions of minorities. Furthermore, they are shaped by ethnic dividing lines and neighbourhood boundaries.

Suggested Citation

  • Giorgio Topa, 2001. "Social Interactions, Local Spillovers and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(2), pages 261-295.
    • Handle: RePEc:oup:restud:v:68:y:2001:i:2:p:261-295.
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00169
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    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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