Working Paper Series
IFAU - Institute for Evaluation of Labour Market and Education Policy
Peter Hedström, Ann-Sofie Kolm and Yvonne Åberg
Social interactions and unemployment
Abstract: This paper is concerned with social interactions and their
importance for unemployment. A theoretical model is specified in which the
psychological costs of unemployment depend upon the unemployment level. The
analysis reveals social multiplier effects, and shows that multiple
unemployment equilibria may emerge. Data on all 20- to 24-year-olds living
in Stockholm during the 1990s are used to test hypotheses from the model.
The results show that individuals’ transition rates out of unemployment is
strongly influenced by the unemployment level within their
Keywords: Social interactions; social norms; social multipliers; unemployment; (follow links to similar papers)
JEL-Codes: J64; Z13; (follow links to similar papers)
41 pages, November 10, 2003
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