Social Interactions in the Labor Market


Book Description

Social Interactions in the Labor Market addresses the following questions: How do theoretical economic models and their associated econometric representations change when there are social interactions among households? How do policy implications change as the result of estimated households' social interactions? The authors present a unified theoretical and empirical representation of social interactions as they pertain to labor supply and demand and demonstrate the cases where current policy prescriptions are greatly altered by the presence of social interactions. Section 2 examines theoretically the effect of household interdependencies on how a researcher estimates and interprets labor supply and earnings equations. Having examined labor supply issues, Section 3 and give theoretical attention to labor demand. As a further demonstration how the presence of social interactions complicates thinking about economic policy the authors consider overall labor market outcomes and related economic policy further in Section 4 by examining theoretically the socially optimal wealth distribution. Section 5 measures local economic conditions by the county unemployment rate and neighborhood spillover effects by the racial makeup and poverty rate of the county. Lastly, Section 6 examines the econometric details of implementing an empirical model with possible social interactions in labor supply.




Social Interactions and the Labor Market


Book Description

To better understand the way social networks operate in the labor market, we propose two simple models where individuals help each other finding a job. In the first one, job information flows between individuals having a link with each other and we show that an equilibrium with a clustering of workers with the same status is likely to emerge since, in the long run, employed workers tend to be friends with employed workers. In the second model, individuals interact with both strong and weak ties and decide how much time they spend with each of them. As in Granovetter, this model stresses the strength of weak ties in finding a job because they involve a secondary ring of acquaintances who have contacts with networks outside ego's network and therefore offer new sources of information on job opportunities. We then discuss some policy implications showing how these models can explain why ethnic minorities tend to experience higher unemployment rate than workers from the majority group.










Three Papers on Social Interactions and Labor Market Outcomes


Book Description

In this dissertation, I study the influences of social interactions on individuals’ labor market outcomes. The first chapter tests for causality in the positive relationship between teenage alcohol consumption and future earnings. Specifically, to investigate this relationship, I exploit the quasi-random variations in high school peer compositions as a treatment to teenage alcohol consumption. By using the National Longitudinal Study of Adolescent Health (Add Health) data, I find that high school peer compositions that cause teenagers to drink more do not have significant influences on their future incomes. This provides indirect evidence that the positive relationship between teenage drinking and future income is not causal. The second chapter examines whether immigrants who are living in ethnic enclaves have labor market advantages. By using 2000 and 2010 U.S. census data and a triple differences model, we find that given the same ethnic group average education, ethnic segregation reduces high-skill immigrants’ wages. This may be because the returns on education are higher for high-skill immigrants when they have more social connections with natives and work in native-dominated labor markets. We also find that as the ethnic group average education decreases, the benefits of ethnic segregation for low-skill immigrants also decrease, likely because competition between low-skill immigrants drives down their wages. The third chapter tests whether teenagers are forward-looking when they choose friends in high school. In particular, we assume that when teenagers choose friends, they consider both immediate payoffs (such as increases in popularity) and long-term economic gains (such as increases in their future earnings) from friendships. Then we estimate which is more important to teenagers when choosing friends, the immediate payoffs or the long-term economic gains. By using Add Health data and a three-period dynamic model, we find that the marginal utility of popularity is much higher than the marginal utility of future earnings, which implies that immediate payoffs are the key factors that influence teenagers’ friendship decisions. Moreover, the outcomes in the heterogeneity tests suggest that African Americans and Hispanics have higher returns on both popularity and future earnings than whites.




Social Interactions in Job Satisfaction


Book Description

TitleAbstract/titlePurpose– The purpose of this paper is to test empirically whether there exist spillover externalities in job satisfaction, i.e., to test whether individual-level job satisfaction is affected by the aggregate job satisfaction level in a certain labor market environment.Design/methodology/approach– The authors use a linear-in-means model of social interactions in the empirical analysis. The authors develop an original strategy, motivated by the hierarchical models of social processes, to identify the parameters of interest. BHPS and WERS datasets are used to perform the estimations both at the establishment and local labor market levels.Findings– The authors find that one standard deviation increase in aggregate job satisfaction leads to a 0.42 standard deviation increase in individual-level job satisfaction at the workplace level and a 0.15 standard deviation increase in individual-level job satisfaction at the local labor market level. In other words, the authors report that statistically significant job satisfaction spillovers exist both at the establishment level and local labor market level; and, the former being approximately three times larger than the latter.Originality/value– First, this is the first paper in the literature estimating spillover effects in job satisfaction. Second, the authors show that the degree of these spillover externalities may change at different aggregation levels. Finally, motivated by the hierarchical models of social processes, the author develop an original econometric identification strategy.













The Social Dynamics of Labor Market Inclusion


Book Description

Labor market inclusion is a complex assignment that takes place through a dynamic interaction between unemployed individuals from vulnerable groups, several authority actors and employers. The overall aim of this thesis was to explore the social dynamics of labor market inclusion, with a particular focus on integration, from the perspectives of employers and authority actors. Three empirical studies have been conducted focusing on different perspectives and integration challenges, using various forms of qualitative methods and theoretical approaches. Study I was a qualitative phenomenographic interview study of employers’ perspectives on labor market inclusion and intersectoral integration. The study showed that employers’ views are multifaceted and can be categorized as constrained, independent, and conditional, and can be understood through a complex internal relationship between conceived individual-, workplace- and authority-related aspects in relation to the themes of trust, contribution, and support (paper I). Study II was a two-year longitudinal case study of an interorganizational integration project, focusing on the authority actors’ perspectives. Through ethnographic fieldwork and a practice-theory approach, two divergent rationalities (an empowerment rationality and a coordinating rationality) were identified within the project organization, and four central concepts were highlighted – communication, trust, structure, and steering – contributing to a collapse in integration (paper II). The dysfunctional group processes were further analyzed with the theory of negative effects of social capital and shadow organizing, summarized as three social dynamics: insulation, homogenization, and escalating commitment (paper III). Study III was a one-year longitudinal case study of a municipal intraorganizational integration project focusing on the perspectives of both authority actors and municipal employers. This study combined ethnographic field work with the theory of social representations, which visualized three different representations among the different professional groups – individual-, employer-, and political-oriented – which contributed to creating tensions within the project, identified as incomprehension, power struggles, expectation gaps, and distrust (paper IV). By studying two labor market inclusion projects through shadow organizing, the thesis has revealed a complex and dynamic interplay between the various views of the actors involved, as well as social processes within the project organizations and organizational aspects, referred to as social dynamics. These social dynamics constitute the key concepts in this thesis, contributing understanding about how integration and organization work within labor market inclusion projects, or rather, what makes them fail. Three social dynamics were identified: multiple and conflicting views, grouping processes, and power struggles. Greater knowledge and awareness of these complex and social dynamics of labor market inclusion may contribute to better preparedness when organizing integration projects. The results suggest that by identifying and addressing the multiple views characterizing integration projects and not letting incomprehension dominate, the destructive social dynamics may not be given as much space, or may even be avoided, which may stimulate a willingness to integrate rather than the opposite.