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Social interactions and unemployment

  • Hedström, Peter

    (Nuffield College, Oxford University)

  • Kolm, Ann-Sofie

    (Uppsala University and IFAU - Institute for Labour Market Policy Evaluation)

  • Åberg, Yvonne

    (Department of Sociology, Stockholm University)

This paper is concerned with social interactions and their importance for unemployment. A theoretical model is specified in which the psychological costs of unemployment depend upon the unemployment level. The analysis reveals social multiplier effects, and shows that multiple unemployment equilibria may emerge. Data on all 20- to 24-year-olds living in Stockholm during the 1990s are used to test hypotheses from the model. The results show that individuals’ transition rates out of unemployment is strongly influenced by the unemployment level within their neighborhoods.

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Paper provided by IFAU - Institute for Evaluation of Labour Market and Education Policy in its series Working Paper Series with number 2003:15.

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Length: 41 pages
Date of creation: 10 Nov 2003
Date of revision:
Handle: RePEc:hhs:ifauwp:2003_015
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