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Friends’ Networks and Job Finding Rates

  • Lorenzo Cappellari

    ()

  • Konstantinos Tatsiramos

    ()

Social interactions are believed to have important consequences for labor market outcomes. Yet the growing literature has been forced to rely on indirect definitions of a network. We present what we believe to be the first evidence that is able to use direct information on the role of close friends. In doing so, we address issues of correlated effects with instrumental variables and panel data. Our estimates suggest that there are large effects from friendship networks, which persist even after controlling for family networks. One additional employed friend increases a person’s job finding probability by approximately 13 percent. This is a result of endogenous social interactions. By testing among alternative mechanisms, our study provides the first evidence that network effects seem to be due to information transmission rather than to social norms or leisure complementarities.

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Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 11/40.

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Date of creation: Sep 2011
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Handle: RePEc:lec:leecon:11/40
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