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A Dynamic Model of Job Networks and Persistent Inequality

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  • Brian Krauth

Abstract

This paper investigates the properties of a local economy in which personal connections are important in finding jobs. The complementarities in the model generate an interesting nonlinear relationship between the distribution of human capital in the economy, the characteristics of the social network, and equilibrium labor market dynamics. The model is shown to be consistent with a number of stylized facts about the increased neighborhood concentration of poverty since 1970. I argue that this type of model is more consistent with the empirical facts about neighborhood poverty than previous models which focus on human capital accumulation.

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  • Brian Krauth, 1998. "A Dynamic Model of Job Networks and Persistent Inequality," Research in Economics 98-06-049e, Santa Fe Institute.
  • Handle: RePEc:wop:safire:98-06-049e
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    References listed on IDEAS

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    1. Holzer, Harry J, 1987. "Informal Job Search and Black Youth Unemployment," American Economic Review, American Economic Association, vol. 77(3), pages 446-452, June.
    2. Datcher, Linda, 1983. "The Impact of Informal Networks of Quit Behavior," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 491-495, August.
    3. Durlauf, Steven N, 1996. "A Theory of Persistent Income Inequality," Journal of Economic Growth, Springer, vol. 1(1), pages 75-93, March.
    4. Streufert, Peter, 2000. " The Effect of Underclass Social Isolation on Schooling Choice," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 2(4), pages 461-482.
    5. Lundberg, Shelly J & Startz, Richard, 1983. "Private Discrimination and Social Intervention in Competitive Labor Markets," American Economic Review, American Economic Association, vol. 73(3), pages 340-347, June.
    6. Case, A.C. & Katz, L.F., 1991. "The Company You Keep: The Effects Of Family And Neighborhood On Disadvantaged Younths," Harvard Institute of Economic Research Working Papers 1555, Harvard - Institute of Economic Research.
    7. Montgomery, James D, 1991. "Social Networks and Labor-Market Outcomes: Toward an Economic Analysis," American Economic Review, American Economic Association, vol. 81(5), pages 1407-1418, December.
    8. Mary Corcoran & Roger H. Gordon & Deborah Laren & Gary Solon, 1989. "Effects of Family and Community Background on Men's Economic Status," NBER Working Papers 2896, National Bureau of Economic Research, Inc.
    9. Bartlett, Robin L & Miller, Timothy I, 1985. "Executive Compensation: Female Executives and Networking," American Economic Review, American Economic Association, vol. 75(2), pages 266-270, May.
    10. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-1240, December.
    11. Roland Benabou, 1993. "Workings of a City: Location, Education, and Production," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 619-652.
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    Cited by:

    1. Yannis M. Ioannides & Linda Datcher Loury, 2004. "Job Information Networks, Neighborhood Effects, and Inequality," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1056-1093, December.
    2. Brian Krauth, 2000. "Social Interactions, Thresholds, and Unemployment in Neighborhoods," Discussion Papers dp00-12, Department of Economics, Simon Fraser University, revised 28 Mar 2000.
    3. Kenneth J. Arrow & Ron Borzekowski, 2004. "Limited network connections and the distribution of wages," Finance and Economics Discussion Series 2004-41, Board of Governors of the Federal Reserve System (U.S.).

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