Working Paper: NBER ID: w11019
Authors: Patrick Bayer; Stephen Ross; Giorgio Topa
Abstract: We use a novel research design to empirically detect the effect of social interactions among neighbors on labor market outcomes. Specifically, using Census data that characterize residential and employment locations down to the city block, we examine whether individuals residing in the same block are more likely to work together than those in nearby blocks. We find evidence of significant social interactions operating at the block level: residing on the same versus nearby blocks increases the probability of working together by over 33 percent. The results also indicate that this referral effect is stronger when individuals are similar in socio-demographic characteristics (e.g., both have children of similar ages) and when at least one individual is well attached to the labor market. These findings are robust across various specifications intended to address concerns related to sorting and reverse causation. Further, having determined the characteristics of a pair of individuals that lead to an especially strong referral effect, we provide evidence that the increased availability of neighborhood referrals has a significant impact on a wide range of labor market outcomes including labor force participation, hours and earnings.
Keywords: Social Interactions; Labor Market Outcomes; Neighborhood Effects
JEL Codes: J41; R14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Residing on the same block (R21) | Increases the probability of working together (C92) |
| One standard deviation increase in neighborhood match quality (C21) | Raises expected hours worked per week (J38) |
| One standard deviation increase in neighborhood match quality (C21) | Increases earnings for males (J31) |
| Neighborhood match quality (R23) | Increases labor force participation for females (J21) |