How Urbanization Affects Employment and Social Interactions

Yasuhiro Sato and Yves Zenou

No 7914, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We develop a model where the unemployed workers in the city can find a job either directly or through weak or strong ties. We show that, in denser areas, individuals choose to interact with more people and meet more random encounters (weak ties) than in sparsely populated areas. We also demonstrate that, for a low urbanization level, there is a unique steady-state equilibrium where workers do not interact with weak ties, while, for a high level of urbanization, there is a unique steady-state equilibrium with full social interactions. We show that these equilibria are usually not socially efficient when the urban population has an intermediate size because there are too few social interactions compared to the social optimum. Finally, even when social interactions are optimal, we show that there is over-urbanization in equilibrium.

Keywords: urban economics; social interactions; strong ties; weak ties; labor market (search for similar items in EconPapers)
JEL-codes: J61 R14 R23 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2014-01
New Economics Papers: this item is included in nep-lab, nep-soc and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - published in: European Economic Review, 2015, 75, 131-155.

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Related works:
Journal Article: How urbanization affect employment and social interactions (2015)
Working Paper: How Urbanization Affect Employment and Social Interactions (2014)
Working Paper: How Urbanization Affect Employment and Social Interactions (2013)
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