Social Interactions and Unemployment

Uppsala University Economics Working Paper No. 2003:18

36 Pages Posted: 13 Oct 2003

See all articles by Ann-Sofie Kolm

Ann-Sofie Kolm

Uppsala University; Institute for Labour Market Policy Evaluation

Peter Hedstrom

University of Oxford - Nuffield College

Yvonne Aberg

Stockholm University - Department of Sociology

Date Written: June 2003

Abstract

This paper is concerned with social interactions and their importance for unemployment. A theoretical model is specified in which the social and psychological costs of unemployment depend upon the unemployment level. The theoretical analysis reveals social multiplier effects, and shows that multiple unemployment equilibria may emerge. Data on all 20- to 24-year-olds living in the Stockholm metropolitan area during the 1990s are used to test key hypotheses derived from the model. The focus is on the role of neighborhood-based reference groups, and the results support the theoretical predictions: unemployment levels vary more across neighborhood-groups than what would be expected based on variation in observable characteristics, and individuals' transition rates out of unemployment appear to be strongly influenced by the unemployment level within their neighborhood-based reference groups.

Keywords: Social interactions, social norms, social multipliers, unemployment

JEL Classification: J64, Z13

Suggested Citation

Kolm, Ann-Sofie and Hedstrom, Peter and Aberg, Yvonne, Social Interactions and Unemployment (June 2003). Uppsala University Economics Working Paper No. 2003:18, Available at SSRN: https://ssrn.com/abstract=443921 or http://dx.doi.org/10.2139/ssrn.443921

Ann-Sofie Kolm (Contact Author)

Uppsala University ( email )

Department of Economics P.O. Box 513
SE-751 20 Uppsala
Sweden
+46 18 4711131 (Phone)
+46 18 4711478 (Fax)

Institute for Labour Market Policy Evaluation ( email )

Box 513
751 20 Uppsala
Sweden
+46 18 471 7081 (Phone)
+46 18 471 7071 (Fax)

Peter Hedstrom

University of Oxford - Nuffield College ( email )

Manor Road
Manor Road
Oxford, OX1 3UQ
United Kingdom

Yvonne Aberg

Stockholm University - Department of Sociology ( email )

Stockholm S-106 91
Sweden

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