Journal Article

Social Interactions, Local Spillovers and Unemployment

Giorgio Topa

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 68, issue 2, pages 261-295
Published in print April 2001 | ISSN: 0034-6527
Published online April 2001 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00169
Social Interactions, Local Spillovers and Unemployment

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I analyse a model that explicitly incorporates local interactions and allows agents to exchange information about job openings within their social networks. Agents are more likely to be employed if their social contacts are also employed. The model generates a stationary distribution of unemployment that exhibits positive spatial correlations. I estimate the model via an indirect inference procedure, using Census Tract data for Chicago. I find a significantly positive amount of social interactions across neighbouring tracts. The local spillovers are stronger for areas with less educated workers and higher fractions of minorities. Furthermore, they are shaped by ethnic dividing lines and neighbourhood boundaries.

Journal Article.  0 words. 

Subjects: Economics

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