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Social Interactions and Labor Market Outcomes in Cities

  • Zenou, Yves


    (Research Institute of Industrial Economics (IFN))

We develop a model where information about jobs is essentially obtained through friends and relatives, i.e. strong and weak ties. Workers commute to a business center to work and to interact with other people. We find that housing prices increase with the level of social interactions in the city because information about jobs is transmitted more rapidly and, as a result, individuals are more likely to be employed and to be able to pay higher land rents. We also show that, under some conditions, workers using more their weak ties than strong ties to find a job receive a higher wage. We finally demonstrate that workers living far away from jobs pay lower housing prices but experience higher unemployment rates than those living close to jobs because they mainly rely on their strong ties to obtain information about jobs.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 755.

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Length: 33 pages
Date of creation: 19 Jun 2008
Date of revision:
Handle: RePEc:hhs:iuiwop:0755
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
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  1. BRUECKNER, Jan K. & THISSE , Jacques-François & ZENOU, Yves, . "Local labor markets, job matching, and urban location," CORE Discussion Papers RP 1545, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Bisin, A. & Verdier, T., 1999. "Beyond the Melting Pot: Cultural Transmission, Marriage, and the Evolution of Ethnic and Religious Traits," Papers 1999-10, Laval - Laboratoire Econometrie.
  3. Jan K. Brueckner & Ann G. Largey, 2006. "Social Interaction and Urban Sprawl," Working Papers 060707, University of California-Irvine, Department of Economics.
  4. Neal, Derek, 2006. "Why Has Black-White Skill Convergence Stopped?," Handbook of the Economics of Education, Elsevier.
  5. Coralio Ballester & Antoni Calvó-Armengol & Yves Zenou, 2006. "Who's Who in Networks. Wanted: The Key Player," Econometrica, Econometric Society, vol. 74(5), pages 1403-1417, 09.
  6. Wasmer, Etienne & Zenou, Yves, 2002. "Does City Structure Affect Job Search and Welfare?," Journal of Urban Economics, Elsevier, vol. 51(3), pages 515-541, May.
  7. repec:cup:cbooks:9780521346627 is not listed on IDEAS
  8. Matt Jackson, 2003. "The Effects of Social Networks on Employment and Inequality," Theory workshop papers 658612000000000032, UCLA Department of Economics.
  9. Laurent Gobillon & Harris Selod & Yves Zenou, 2007. "The Mechanisms of Spatial Mismatch," Urban Studies, Urban Studies Journal Limited, vol. 44(12), pages 2401-2427, November.
  10. Patrick Bayer & Stephen Ross & Giorgio Topa, 2005. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," NBER Working Papers 11019, National Bureau of Economic Research, Inc.
  11. Harris Selod & Yves Zenou, 2004. "City Structure, Job Search and Labor Discrimination. Theory and Policy Implications," Working Papers 2004-13, Centre de Recherche en Economie et Statistique.
  12. Topa, Giorgio, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 261-95, April.
  13. Calvó-Armengol, Antoni & Verdier, Thierry & Zenou, Yves, 2006. "Strong and Weak Ties in Employment and Crime," CEPR Discussion Papers 5448, C.E.P.R. Discussion Papers.
  14. repec:cup:cbooks:9780521857406 is not listed on IDEAS
  15. Edward E. Glaeser & Bruce Sacerdote & Jose A. Scheinkman, 1995. "Crime and Social Interactions," Harvard Institute of Economic Research Working Papers 1738, Harvard - Institute of Economic Research.
  16. repec:cup:cbooks:9780521396455 is not listed on IDEAS
  17. Kan, Kamhon, 2007. "Residential mobility and social capital," Journal of Urban Economics, Elsevier, vol. 61(3), pages 436-457, May.
  18. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
  19. Coulson, N Edward & Laing, Derek & Wang, Ping, 2001. "Spatial Mismatch in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 949-72, October.
  20. Zenou, Yves, 2003. "Urban Labour Economic Theory," CEPR Discussion Papers 4029, C.E.P.R. Discussion Papers.
  21. Zenou, Yves, 2003. "Efficiency Wages and Unemployment in Cities: The Case of High Relocation Costs," CEPR Discussion Papers 4058, C.E.P.R. Discussion Papers.
  22. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  23. repec:cup:cbooks:9780521674096 is not listed on IDEAS
  24. Shihe Fu, 2005. "What Has Been Capitalized into Property Values: Human Capital, Social Capital, or Cultural Capital?," Working Papers 05-25, Center for Economic Studies, U.S. Census Bureau.
  25. Robert W. Helsley & William C. Strange, 2007. "Urban interactions and spatial structure," Journal of Economic Geography, Oxford University Press, vol. 7(2), pages 119-138, March.
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