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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
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Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

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Web page: http://www.ifn.se/
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  1. Patrick Bayer & Stephen L. Ross & Giorgio Topa, 2008. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1150-1196, December.
  2. Calvo-Armengol, Antoni & Verdier, Thierry & Zenou, Yves, 2007. "Strong and weak ties in employment and crime," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 203-233, February.
  3. 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.
  4. Laurent Gobillon & Harris Selod & Yves Zenou, 2005. "The mechanisms of spatial mismatch," Research Unit Working Papers 0510, Laboratoire d'Economie Appliquee, INRA.
  5. Jan K. Brueckner & Ann G. Largey, 2006. "Social Interaction and Urban Sprawl," CESifo Working Paper Series 1843, CESifo Group Munich.
  6. Brueckner, Jan & Thisse, Jacques-François & Zenou, Yves, 2000. "Local Labour Markets, Job Matching and Urban Location," CEPR Discussion Papers 2612, C.E.P.R. Discussion Papers.
  7. Vega-Redondo,Fernando, 2007. "Complex Social Networks," Cambridge Books, Cambridge University Press, number 9780521674096, December.
  8. 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.
  9. Antoni Calvó-Armengol & Matthew O. Jackson, 2004. "The Effects of Social Networks on Employment and Inequality," American Economic Review, American Economic Association, vol. 94(3), pages 426-454, June.
  10. Fujita,Masahisa, 1991. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521396455, December.
  11. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
  12. Kan, Kamhon, 2007. "Residential mobility and social capital," Journal of Urban Economics, Elsevier, vol. 61(3), pages 436-457, May.
  13. 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.
  14. Selod, Harris & Zenou, Yves, 2005. "City Structure, Job Search and Labour Discrimination. Theory and Policy Implications," CEPR Discussion Papers 5009, C.E.P.R. Discussion Papers.
  15. Giorgio Topa, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 261-295.
  16. Neal, Derek, 2006. "Why Has Black-White Skill Convergence Stopped?," Handbook of the Economics of Education, Elsevier.
  17. 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.
  18. 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.
  19. 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.
  20. Vega-Redondo,Fernando, 2007. "Complex Social Networks," Cambridge Books, Cambridge University Press, number 9780521857406, December.
  21. Zenou, Yves, 2003. "Urban Labour Economic Theory," CEPR Discussion Papers 4029, C.E.P.R. Discussion Papers.
  22. 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.
  23. Alberto Bisin & Thierry Verdier, 2000. ""Beyond the Melting Pot": Cultural Transmission, Marriage, and the Evolution of Ethnic and Religious Traits," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 955-988.
  24. 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.
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