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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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File URL: http://www.le.ac.uk/economics/research/repec/lec/leecon/dp11-40.pdf
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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
Contact details of provider: Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
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  1. 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.
  2. Michele Pellizzari, 2004. "Do Friends and Relatives Really Help in Getting a Good Job?," CEP Discussion Papers dp0623, Centre for Economic Performance, LSE.
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  5. Lorenzo Cappellari & Stephen P. Jenkins, 2008. "Estimating low pay transition probabilities accounting for endogenous selection mechanisms," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 57(2), pages 165-186.
  6. van der Klaauw, B. & van Ours, J.C., 2003. "From welfare to work : Does the neighbourhood matter?," Other publications TiSEM 196c643f-07ca-496b-950c-b, School of Economics and Management.
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  9. Topa, Giorgio, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 261-95, April.
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  11. Andrea Galeotti & Luca Paolo Merlino, 2014. "Endogenous Job Contact Networks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 1201-1226, November.
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  13. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," NBER Working Papers 7580, National Bureau of Economic Research, Inc.
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  17. Stephen L. Ross, 2009. "Social Interactions within Cities: Neighborhood Environments and Peer Relationships," Working papers 2009-31, University of Connecticut, Department of Economics.
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  20. van der Klaauw, Bas & van Ours, Jan C., 2003. "From welfare to work: does the neighborhood matter?," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 957-985, May.
  21. Ian Schmutte, 2010. "Job Referral Networks and the Determination of Earnings in Local Labor Markets," Working Papers 10-40, Center for Economic Studies, U.S. Census Bureau.
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  28. Federico Cingano & Alfonso Rosolia, 2006. "People I Know: Workplace Networks and Job Search Outcomes," Temi di discussione (Economic working papers) 600, Bank of Italy, Economic Research and International Relations Area.
  29. Linda Datcher Loury, 2006. "Some Contacts Are More Equal than Others: Informal Networks, Job Tenure, and Wages," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 299-318, April.
  30. Sergio Currarini & Paolo Pin & Matthew O. Jackson, 2007. "An Economic Model of Friendship: Homophily, Minorities and Segregation," Working Papers 2007_20, Department of Economics, University of Venice "Ca' Foscari".
  31. Mortensen, D. T. & Vishwanath, T., 1995. "Personal contacts and earnings: It is who you know!," Labour Economics, Elsevier, vol. 2(1), pages 103-104, March.
  32. Lori A. Beaman, 2012. "Social Networks and the Dynamics of Labour Market Outcomes: Evidence from Refugees Resettled in the U.S," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 128-161.
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