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Social Interactions and Labor Market Outcomes in Cities

Yves Zenou

Stockholm University; Research Institute of Industrial Economics (IUI); IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

June 12, 2008

IFN Working Paper No. 755

We develop a model where information about jobs is essentially obtained through friends and relatives, i.e. strong and weak ties. Workers commute to a business center to work and to interact with other people. We find that housing prices increase with the level of social interactions in the city because information about jobs is transmitted more rapidly and, as a result, individuals are more likely to be employed and to be able to pay higher land rents. We also show that, under some conditions, workers using more their weak ties than strong ties to find a job receive a higher wage. We finally demonstrate that workers living far away from jobs pay lower housing prices but experience higher unemployment rates than those living close to jobs because they mainly rely on their strong ties to obtain information about jobs.

Number of Pages in PDF File: 33

Keywords: Weak Ties, Labor Market, Social Networks, Land Rent

JEL Classification: A14, J60, R14

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Date posted: January 31, 2011  

Suggested Citation

Zenou, Yves, Social Interactions and Labor Market Outcomes in Cities (June 12, 2008). IFN Working Paper No. 755. Available at SSRN: https://ssrn.com/abstract=1750086 or http://dx.doi.org/10.2139/ssrn.1750086

Contact Information

Yves Zenou (Contact Author)
Stockholm University ( email )
Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Research Institute of Industrial Economics (IUI) ( email )
P.O. Box 5501
S-114 85 Stockholm
IZA Institute of Labor Economics
P.O. Box 7240
Bonn, D-53072

Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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