Explaining the Black/White Employment Gap: The Role of Weak Ties
Stockholm University; Research Institute of Industrial Economics (IUI); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)
CEPR Discussion Paper No. DP8582
The aim of this paper is to provide a new mechanism based on social interactions explaining why minority workers have worse labor-market outcomes than majority workers. Building on Granovetter's idea that weak ties are superior to strong ties for providing support in getting a job, we develop a social interaction model where workers can obtain a job through either their strong or weak ties. In this model, it is better to meet weak ties because a strong tie does not help in the state where all best friends are unemployed. But a weak tie can help leaving unemployment in any state because that person might be employed. So there is an asymmetry that is key to the model and that explains why some workers (blacks) may be stuck in poverty traps having little contact with weak ties (whites) that can help them escape unemployment.
Number of Pages in PDF File: 59
Keywords: labor market, social networks, Weak ties
JEL Classification: A14, J15, Z13working papers series
Date posted: September 29, 2011
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