Social and Behavioral Sciences Commons^™

Social Interactions In The Labor Market, Andrew Grodner, Thomas J. Kniesner, John A. Bishop

Center for Policy Research

We examine theoretically and empirically social interactions in labor markets and how policy prescriptions can change dramatically when there are social interactions present.

Spillover effects increase labor supply and conformity effects make labor supply perfectly inelastic at a reference group average. The demand for a good may also be influenced by either a spillover effect or a conformity effect. Positive spillover increases the demand for the good with interactions, and a conformity effect makes the demand curve pivot to become less price sensitive. Similar social interactions effects appear in the associated derived demands for labor.

Individual and community factors may …