Working Paper: NBER ID: w21262
Authors: Judith K. Hellerstein; Mark J. Kutzbach; David Neumark
Abstract: We measure the changing efficacy of neighborhood-based labor market networks, across the business cycle, in helping displaced workers become re-employed, focusing on the periods before, during, and just after the Great Recession. Networks can only be effective when hiring is occurring, and hiring varied greatly between 2005 and 2012, the period we study. We therefore focus on a measure of the strength of the labor market networks that includes not only the number of employed neighbors of a laid off worker, but also the gross hiring rate at that person’s neighbors’ workplaces. Our evidence indicates that local labor market networks increase re-employment following mass layoffs, and in particular, that networks serve to markedly increase the probability of re-employment specifically at neighbors’ employers. This is especially true for low-earnings workers. Moreover, although hiring and employment rates decreased during the Great Recession period, the productivity of labor market networks in helping to secure re-employment for laid off workers was remarkably stable during our sample period.
Keywords: labor market networks; mass layoffs; Great Recession; reemployment; neighborhood effects
JEL Codes: J01; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| stronger residence-based labor market networks (R23) | reemployment (J68) |
| local labor market networks (J46) | probability of reemployment (J68) |
| AEN (active employer network measure) (J68) | probability of reemployment at a neighbor's employer (J63) |
| local employment rates and hiring rates (J63) | job search outcomes (J68) |