published in: Labour Economics, 2010, 17 (1), 188-195
We study the influence of social networks on labor market transitions. We develop the first
model where social ties and job status coevolve through time. Our key assumption is that the
probability of formation of a new tie is greater between two employed individuals than
between an employed and an unemployed individual. We show that this assumption
generates negative duration dependence of exit rates from unemployment. Our model has a
number of novel testable implications. For instance, we show that a higher connectivity
among unemployed individuals reduces duration dependence and that exit rates depend
positively on the duration of the last job held by the unemployed worker.
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