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The implications of labor market network for business cycles

Author

Listed:
  • Marcelo Arbex

    (Department of Economics, University of Windsor)

  • Sidney Caetano

    (Faculdade de Economia, Universidade Federal de Juiz de Fora)

  • Dennis O'Dea

    (Department of Economics, University of Washington)

Abstract

This paper modifies the standard labor market search model with social networks. Labor market networks is an important job information transmission channel and the complementarity of network and direct search by the unemployed amplify the economy's short-run response to a technological shock. We show that network search has important quantitative consequences for the business cycle, in particular, for output and unemployment.

Suggested Citation

  • Marcelo Arbex & Sidney Caetano & Dennis O'Dea, 2016. "The implications of labor market network for business cycles," Working Papers 1603, University of Windsor, Department of Economics.
    • Handle: RePEc:wis:wpaper:1603
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    References listed on IDEAS

    as
    1. Calvo-Armengol, Antoni & Zenou, Yves, 2005. "Job matching, social network and word-of-mouth communication," Journal of Urban Economics, Elsevier, vol. 57(3), pages 500-522, May.
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    3. Andrea Galeotti & Luca Paolo Merlino, 2014. "Endogenous Job Contact Networks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(4), pages 1201-1226, November.
    4. Vega-Redondo,Fernando, 2007. "Complex Social Networks," Cambridge Books, Cambridge University Press, number 9780521857406, January.
    5. Antoni Calvó-Armengol & Matthew O. Jackson, 2004. "The Effects of Social Networks on Employment and Inequality," American Economic Review, American Economic Association, vol. 94(3), pages 426-454, June.
    6. Yannis M. Ioannides & Linda Datcher Loury, 2004. "Job Information Networks, Neighborhood Effects, and Inequality," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1056-1093, December.
    7. Arbex, Marcelo & O'Dea, Dennis, 2014. "Optimal Taxation And Social Networks," Macroeconomic Dynamics, Cambridge University Press, vol. 18(8), pages 1683-1712, December.
    8. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    9. Fontaine, Francois, 2007. "A simple matching model with social networks," Economics Letters, Elsevier, vol. 94(3), pages 396-401, March.
    10. Merlino, Luca Paolo, 2014. "Formal and informal job search," Economics Letters, Elsevier, vol. 125(3), pages 350-352.
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    14. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
    15. Jean-Olivier Hairault, 2002. "Labor-Market Search and International Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 535-558, July.
    16. Vega-Redondo,Fernando, 2007. "Complex Social Networks," Cambridge Books, Cambridge University Press, number 9780521674096, January.
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    18. Arnaud Cheron & Francois Langot, 2004. "Labor Market Search and Real Business Cycles: Reconciling Nash Bargaining with the Real Wage Dynamics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 476-493, April.
    19. Cabrales, Antonio & Calvó-Armengol, Antoni & Zenou, Yves, 2011. "Social interactions and spillovers," Games and Economic Behavior, Elsevier, vol. 72(2), pages 339-360, June.
    20. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-132, March.
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    Cited by:

    1. Merlino, Luca Paolo, 2019. "Informal job search through social networks and vacancy creation," Economics Letters, Elsevier, vol. 178(C), pages 82-85.
    2. Moreno Galbis, Eva & Wolff, Francois-Charles & Herault, Arnaud, 2020. "How helpful are social networks in finding a job along the economic cycle? Evidence from immigrants in France," Economic Modelling, Elsevier, vol. 91(C), pages 12-32.
    3. André, Keven R.A. & Arbex, Marcelo & Corrêa, Márcio V., 2023. "The economic implications of a network SIR-Macro model of epidemics," Economics Letters, Elsevier, vol. 225(C).

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    More about this item

    Keywords

    Business Cycles; Labor Markets; Social networks; Job search.;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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