Social network, unemployment and sector trap: A theoretical model explaining the case study of Portuguese immigrants in the French labor market

Abstract

This paper shows that social networks are likely to induce sector concentration and sector trapping in the labor market. We develop a two-sector economy with endogenous allocation of the labor force between sectors and social networks that favor the transmission of job information. We show that social networks can induce sector concentration even when sectoral productivities and entry costs are perfectly symmetric. Moreover, we show that social networks can also trap workers in poorly productive sectors. These results are in accordance with the migration history and the situation of Portuguese immigrants in the French labor market.