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Virtual Social Currencies for Unemployed People: Social Networks and Job Market Access

  • Maëlle Della Peruta

    (University of Nice Sophia Antipolis, France
    GREDEG CNRS)

  • Dominique Torre

    (University of Nice Sophia Antipolis, France
    GREDEG CNRS)

Alternative currencies continue to develop all around the world, taking various forms (material or immaterial) and fulfill various functions. They are created in order to promote the local economy development and to fight against social exclusion. They are principally aimed to low income people (retired or unemployed people, or people who are living with a low wage). In this paper, we analyze the particular case of virtual currency circulation inside a local community of unemployed people. We elaborate on the assumptions that the organization of LETS and the circulation of complementary currencies have two properties: (i) they help unemployed workers to overcome the double coincidence of want necessity of an informal sector founded on barter exchange; (ii) they help to maintain and develop workers' skills outside job, helping them to observe opportunities of employment even as long-term unemployed workers. We study the global properties of a job market associating traditional short-term and long-term unemployment to the organization of LETS. Using a theoretical Pissarides-style model, we find that the initial level of trust of agents in the complementary currency(cies) but also the effective properties of this(these) currency(cies) are crucial for LETS to become permanent institutions. We also find that if the stationary equilibrium of the job-market includes LETS, then LETS have a positive influence on the rate of employment, on the expected utility of employed workers, and are Pareto improving when the benchmark case is a job market without any LETS.

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Paper provided by Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis in its series GREDEG Working Papers with number 2014-16.

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Length: 19 pages
Date of creation: May 2014
Date of revision:
Handle: RePEc:gre:wpaper:2014-16
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  10. Flaig, Gebhard & Licht, Georg & Steiner, Viktor, 1993. "Testing for state dependence effects in a dynamic model of male unemployment behaviour," ZEW Discussion Papers 93-07, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  11. Gomez, Georgina M. & Helmsing, A.H.J., 2008. "Selective Spatial Closure and Local Economic Development: What Do We Learn from the Argentine Local Currency Systems?," World Development, Elsevier, vol. 36(11), pages 2489-2511, November.
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