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Social Interactions and Unemployment

  • Hedström, Peter

    ()

    (Nuffield College)

  • Kolm, Ann-Sofie

    ()

    (Department of Economics)

  • Åberg, Yvonne

    ()

    (Department of Sociology)

This paper is concerned with social interactions and their importance for unemployment. A theoretical model is specified in which the social and psychological costs of unemployment depend upon the unemployment level. The theoretical analysis reveals social multiplier effects, and shows that multiple unemployment equilibria may emerge. Data on all 20- to 24-year-olds living in the Stockholm metropolitan area during the 1990s are used to test key hypotheses derived from the model. The focus is on the role of neighborhood-based reference groups, and the results support the theoretical predictions: unemployment levels vary more across neighborhood-groups than what would be expected based on variation in observable characteristics, and individuals' transition rates out of unemployment appear to be strongly influenced by the unemployment level within their neighborhood-based reference groups.

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File URL: http://www.nek.uu.se/pdf/wp2003_18.pdf
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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2003:18.

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Length: 36 pages
Date of creation: 20 Jun 2003
Date of revision:
Handle: RePEc:hhs:uunewp:2003_018
Contact details of provider: Postal:
Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden

Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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