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This paper investigates the social endogenous effect linking the employment probability of young workers entering the labour market to the local employment rate. We focus on the transition from school to work, using a representative sample of youths leaving the French educational system in 1998 and 2004. We identify the causal effect of local employment rate using a neighbourhood fixed-effect strategy (Bayer et al, 2007).We provide evidence that the within-neighbourhood random allocation assumption is likely to hold. The results show that an individual’s own employment is strongly affected by the share of working people in their neighbourhood, estimates being higher for high-school dropouts. Results also reveal gender differences, suggesting that young people are more sensitive to same-sex neighbours.

Do Workers Make Good Neighbours? The Impact of Local Employment on Young Male and Female Entrants to the Labour Market