This paper studies the relevance of social interactions among the unemployed. Identification
is based on a salient and selective extension of the potential duration of unemployment
benefits. If social interactions are important, this policy change affects entitled individuals not
only directly, but also indirectly by altering the duration of unemployment in the reference
group. Moreover, this spillover effect of the policy should also be observed in the non-entitled
group. Results indicate that there are strong indirect effects on the entitled, strong positive
spillovers on the non-entitled, and that social interactions are about as important as the direct
effects of the policy change.
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