DP4523 Social Networks and Labour Market Transitions
|Author(s):||Yann Bramoullé, Gilles Saint-Paul|
|Publication Date:||August 2004|
|Keyword(s):||duration dependence, economic inbreeding, social capital, social networks, unemployment|
|JEL(s):||E24, J6, Z13|
|Programme Areas:||International Macroeconomics, Labour Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=4523|
We study the influence of social networks on labour market transitions. We develop the first model where social ties and job status co-evolve through time. Our key assumption is that the probability of formation of a new tie is greater between two employed individuals than between an employed and an unemployed individual. We show that this assumption generates negative duration dependence of exit rates from unemployment. Our model has a number of novel testable implications. For instance, we show that a higher connectivity among unemployed individuals reduces duration dependence and that exit rates depend positively on the duration of the last job held by the unemployed worker.