Skip to main content

Social networks and labor market inequality between ethnicities and races


This paper analyzes the relationship between unexplained racial/ethnic wage differentials on the one hand and social network segregation, as measured by inbreeding homophily, on the other. Our analysis is based on both the US and Estonian surveys, supplemented with the Estonian telephone communication data. In the case of Estonia we consider the regional variation in economic performance of the Russian minority, and in the US case we consider the regional variation in black--white differentials. Our analysis finds a strong relationship between the size of the wage differential and network segregation: Regions with more segregated social networks exhibit larger unexplained wage gaps.

Hide All
Altonji, J. G., & Blank, R. M. (1999). Race and gender in the labor market. In Ashenfelter, O., & Card, D. (Eds.), Handbook of labor economics, vol. 3C, Chap. 48 (pp. 31433259). Netherlands: Elsevier Science.
Arrow, K. J. (1972). Some mathematical models of race in the labor market. In Pascal, A. H. (Ed.), Racial discrimination in economic life. Lanham, MD: Lexington Books.
Arrow, K. J. (1998). What has economics to say about racial discrimination. Journal of Economic Perspectives, 12 (2), 91100.
Banerjee, B., & Knight, J. B. (1985). Caste discrimination in the Indian urban labour market. Journal of Development Economics, 17 (3), 277307.
Becker, G. S. (1957). Economics of discrimination. Chicago, IL: Chicago University Press.
Benabou, R. (1993). Workings of a city: Location, education, and production. Quarterly Journal of Economics, 108 (3), 619652.
Bhumaik, S. K., Gang, I. N., & Yun, M.-S. (2006). Ethnic conflict and economic disparity: Serbians and Albanians in Kosovo. Journal of Comparative Economics, 34, 754773.
Blackaby, D. H., Leslie, D. G., Murphy, P. D. & O'Leary, N. C. (2005). Born in Britain: How are native ethnic minorities faring in the British labour market? Economics Letters, 88(Sept.), 370375.
Blau, P. M. (1977). Inequality and heterogeneity: A primitive theory of social structure. New York, NY: Free Press.
Blinder, A. S. (1973). Wage discrimination: Reduced form and structural estimates. Journal of Human Resources, 8 (4), 436455.
Burt, R. S. (1992). Structural holes: The social structure of competition. Cambridge, MA: Harvard University Press.
Calvó-Armengol, A., & Jackson, M. O. (2004). The effects of social networks on employment and inequality. American Economic Review, 94 (3), 426454.
Calvó-Armengol, A., Patacchini, E., & Zenou, Y. (2009). Peer effects and social networks in education. Review of Economic Studies, 76 (4), 12391267.
Card, D., & Rothstein, J. (2007). Racial segregation and the black-white test score gap. Journal of Public Economics, 91 (11–12), 21582184.
Charles, K. K., & Guryan, J. (2008). Prejudice and wages: An empirical assessment of Becker's “the economics of discrimination.” Journal of Political Economy, 116 (5), 773809.
Chua, A. (2004). World on fire: How exporting free market democracy breeds ethnic hatred and global instability. Flushing, MI: Anchor.
Coleman, J. S. (1958). Relational analysis: The study of social organizations with survey methods. Human Organization, 17 (4), 2836.
Coleman, J. S., Katz, E., & Menzel, H. (1966). Medical innovation: A diffusion study. Indianapolis: Bobbs-Merrill.
Currarini, S., Jackson, M. O., & Pin, P. (2009). An economic model of friendship: Homophily, minorities and segregation. Econometrica, 77 (4), 10031045.
Eagle, N., Macy, M., & Claxton, R. (2010). Network diversity and economic development. Science, 328, 10291031.
Giddings, L. (2002). Has the shift toward markets hurt ethnic minorities? Changes in ethnic earnings differentials in Bulgaria's early transition. International Journal of Manpower, 23 (1), 931.
Granovetter, M. S. (1974). Getting a job: A study of contacts and careers. Harvard, MA: Harvard University Press.
Haythornthwaite, C. (2005). Social networks and internet connectivity effects. Information, Communication and Society, 8 (2), 125147.
Hellerstein, J. K., McInerney, M., & Neumark, D. (2008, July). Measuring the importance of labor market networks. Working Paper 14201. National Bureau of Economic Research, Cambridge, MA.
Hellerstein, J. K., & Neumark, D. (2008). Workplace segregation in the United States: Race, ethnicity, and skill. The Review of Economics and Statistics, 90 (3), 459477.
Holzer, H. J. (1988). Search method use by unemployed youth. Journal of Labor Economics, 6 (1), 120.
Ioannides, Y. M., & Loury, L. D. (2004). Job information networks, neighborhood effects, and inequality. Journal of Economic Literature, 42, 10561093.
Knight, J. B & McGrath, M. D. (1977). An analysis of racial wage discrimination in South Africa. Oxford Bulletin of Economics and Statistics, 39 (4), 245271.
Korts, K., & Kõuts, R. (2002). Inter-ethnic communication in Estonian media (in Estonian). In Valk, A. (Ed.), Estonia and Estonians in comparative perspective (in Estonian) (pp. 234245). Tartu, Estonia: Tartu University Press.
Lazarsfeld, P. F., & Merton, R. K. (1954). Friendship as a social process: A substantive and methodological analysis. Freedom and Control in Modern Society, 18, 1866.
Leping, K.-O., & Toomet, O. (2008). Emerging ethnic wage gap: Estonia during political and economic transition. Journal of Comparative Economics, 36 (4), 599619.
Leskovec, J., & Horvitz, E. (2007). Worldwide buzz: Planetary-scale views on an instant-messaging network. Technical report MSR-TR-2006-186. Microsoft Research, Redmont, WA.
Lundberg, S., & Startz, R. (1998). On the persistence of racial inequality. Journal of Labor Economics, 16 (2), 292323.
Manski, C. F. (2000). Economic analysis of social interactions. Journal of Economic Perspectives, 14 (3), 115136.
Massey, D. S., & Denton, N. A. (1988). The dimensions of residential segregation. Social Forces, 67 (2), 281315.
Mayer, A., & Puller, S. L. (2008). The old boy (and girl) network: Social network formation on university campuses. Journal of Public Economics, 92 (1–2), 329347.
McPherson, M., Smith-Lovin, L., & Cook, J. M. (2001). Birds of a feather: Homophily in social networks. Annual Review of Sociology, 27, 415444.
Montgomery, J. D. (1991). Social networks and labor-market outcomes: Toward an economic analysis. American Economic Review, 81 (5), 14081418.
Moody, J. (2001). Race, school integration, and friendship segregation in America. American Journal of Sociology, 107 (3), 679716.
Oaxaca, R. L. (1973). Male-female wage differentials in urban labor markets. International Economic Review, 14 (3), 693709.
Pettai, I. (2002). Mutual tolerance of Estonians and non-Estonians (in Estonian). In Valk, A. (Ed.), Estonia and Estonians in a comparative perspective. Intercultural studies at the end of the 20th century. Tartu, Estonia: Tartu University Press.
Royster, D. A. (2007). What happens to potential discouraged? Masculinity norms and the contrasting institutional and labor market experiences of less affluent Black and White men. The Annals of the American Academy of Political and Social Science, 609 (1), 153180.
Schafgans, M. (1998). Ethnic wage differences in Malaysia: Parametric and semi-parametric estimation of the Chinese–Malay wage gap. Journal of Applied Econometrics, 13 (5), 481504.
Schelling, T. C. (1978). Micromotives and macrobehavior. New York, NY: WW Norton.
Sethi, R., & Somanathan, R. (2004). Inequality and segregation. Journal of Political Economy, 112 (6), 12961321.
Toomet, O. (2011). Learn English, not the local language! Ethnic minorities in the Baltic states. American Economic Review, 101 (3), 526531.
Toomet, O., Silm, S., Saluveer, E., Tammaru, T., & Ahas, R. (2012). Ethnic segregation in residence, work, and free-time: Evidence from mobile communication. Tartu, Estonia: University of Tartu.
Valk, A. (Ed.), (2002). Estonia and Estonians in a comparative perspective (in estonian). Tartu, Estonia: Tartu University Press.
Van der Leij, M. J., & Buhai, I. S. (2008). A social network analysis of occupational segregation. Working Papers 192. Fondazione Eni Enrico Mattei, Milan, Italy.
Wimmer, A., & Lewis, K. (2010). Beyond and below racial homophily: ERG models of a friendship network documented on facebook. American Journal of Sociology, 116 (2), 583642.
Wooldridge, J. M. (2002). Econometric analysis of cross section and panel data. Cambridge, MA: MIT Press.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Network Science
  • ISSN: 2050-1242
  • EISSN: 2050-1250
  • URL: /core/journals/network-science
Please enter your name
Please enter a valid email address
Who would you like to send this to? *



Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed