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Social Interactions and Unemployment

Author

Listed:
  • Hedström, Peter

    (Nuffield College)

  • Kolm, Ann-Sofie

    (Department of Economics)

  • Åberg, Yvonne

    (Department of Sociology)

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.

Suggested Citation

  • Hedström, Peter & Kolm, Ann-Sofie & Åberg, Yvonne, 2003. "Social Interactions and Unemployment," Working Paper Series 2003:18, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:2003_018
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    More about this item

    Keywords

    Social interaction; social norms; social multipliers; unemployment;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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