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Networks in Labor Markets: Wage and Employment Dynamics and Inequality

Calvó-Armengol, Antoni and Jackson, Matthew O. (2001) Networks in Labor Markets: Wage and Employment Dynamics and Inequality. Social Science Working Paper, 1213. California Institute of Technology , Pasadena, CA. (Unpublished)

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We present a model of labor markets that accounts for the social network through which agents hear about jobs. We show that both wages and employment are positively associated (a strong form of correlation) across time and agents. We also analyze the decisions of agents regarding staying in the labor market or dropping out. If there are costs to staying in the labor market, then networks of agents that start with a worse wage status will have higher drop-out rates and there will be a persistent differences in wages between groups according to the starting states of their networks.

Item Type:Report or Paper (Working Paper)
Related URLs:
URLURL TypeDescription ItemLater version published in Journal of Economic Theory
Jackson, Matthew O.0000-0001-9846-4249
Additional Information:Original - October 2001 (no copy), Revised - August 1, 2005 We thank Valentina Bali, Kim Border, Antonio Cabrales, Janet Currie, Isa Hafalir, Eddie Lazear, Massimo Morelli, and David Perez-Castrillo, for helpful conversations and discussions. We also thank an associate editor and referees for their comments and suggestions. We gratefully acknowledge the financial support of Spain's Ministry of Education under grant BEC2002-02130, Fundacion Ramon Areces, the Barcelona Economics Program CREA, and the Lee Center for Advanced Networking at Caltech. This paper was formerly part of Calvo-Armengol and Jackson (2004). That paper was split into two parts, with the part under the former title looking at a special case of the networks outlined here and focusing on employment dynamics, and this part looking at a more general set of networks and exploring both wage and employment dynamics.
Group:Social Science Working Papers
Funding AgencyGrant Number
Ministerio de Ciencia y Tecnología (MEC)BEC 2002-02130
Fundacion Ramon ArecesUNSPECIFIED
Barcelona Economics Program CREAUNSPECIFIED
Caltech Lee Center for Advanced NetworkingUNSPECIFIED
Subject Keywords:Networks, Labor Markets, Employment, Unemployment, Wages, Wage Inequality, Drop-Out Rates
Series Name:Social Science Working Paper
Issue or Number:1213
Classification Code:JEL: D85, A14, J64, J31, J70, L14
Record Number:CaltechAUTHORS:20190426-132748854
Persistent URL:
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:95030
Deposited By: Katherine Johnson
Deposited On:26 Apr 2019 20:34
Last Modified:03 Oct 2019 21:09

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