Abstract

Social networks may affect individual workers' labor market outcomes. Using rich spatial data from administrative records, we analyze whether neighbors' employment status influences an individual worker's employment probability after establishment closure and, if hired, his wage. Our findings suggest that a 10 percentage point higher neighborhood employment rate increases the probability of having a job after six months by 0.8 percentage points and daily earnings by 1.7 percent. The neighborhood effect seems not to be driven by social norms but information transmission via neighborhoods and, additionally, via former co-worker networks.