A Paradox of Economic Prosperity and Social Integration?

Abstract

This paper investigates the consequences of local labour market conditions on immigrants' social network formation, with an emphasis on the co-ethnic contact and the contact with the natives. A job and residential search model is derived and empirically tested for the case of immigrants in the Netherlands. It is found that a higher job arrival rate, and a larger wage difference between the ethnic labour market and the host labour market, both lead to more co-ethnic network developed, less native network developed, and the choice of more ethnically concentrated areas. A paradox of economic prosperity and social integration has been found in the sense that immigrants spontaneously assimilate less into host society in good times of the economy at the destination country.

Keywords: social networks, regional labour market, immigrants

JEL Classification: R23, J15, Z13