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Neighborhood effects on unemployment ? A test à la Altonji

  • Claire Dujardin

    ()

    (CORE - Center for Operations Research and Econometrics - Université Catholique de Louvain)

  • Florence Goffette-Nagot

    ()

    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

The aim of this paper is to test for the influence of neighborhood deprivation on individual unemployment probability in the case of Lyon (France). We estimate a bivariate probit model of unemployment and location in a deprived neighborhood. Our identification strategy is twofold. First, we instrument neighborhood type by the gender composition of household's children and the spouse's workplace. Second, we use the methodology proposed by Altonji et al. (2005), that in our case consists in making hypotheses as to the correlation between the unobservables that determine unemployment and the unobservables that influence the selection into neighborhood types. Our results show that the effect of neighborhood deprivation is not significantly different from zero in the bivariate probit with exclusion restrictions. We also show that a correlation of the unobservables as low as ten percent of the correlation of observables is sufficient to explain the positive neighborhood effect that is observed when endogeneity is not accounted for.

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Paper provided by HAL in its series Post-Print with number halshs-00435119.

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Date of creation: 2010
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Publication status: Published, Regional Science and Urban Economics, 2010, 40, 6, pp. 380-396
Handle: RePEc:hal:journl:halshs-00435119
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00435119/en/
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