||We use a novel research design to empirically detect the effect of social interactions
among neighbors on labor market outcomes. Specifically, using Census data that characterize
residential and employment locations down to the city block, we examine whether individuals
residing in the same block are more likely to work together than those in nearby blocks.
We find evidence of significant social interactions operating at the block level:
residing on the same versus nearby blocks increases the probability of working together
by over 33 percent. The results also indicate that this referral effect is stronger
when individuals are similar in socio-demographic characteristics (e.g., both have
children of similar ages) and when at least one individual is well attached to the
labor market. These findings are robust across various specifications intended to
address concerns related to sorting and reverse causation. Further, having determined
the characteristics of a pair of individuals that lead to an especially strong referral
effect, we provide evidence that the increased availability of neighborhood referrals
has a significant impact on a wide range of labor market outcomes including labor
force participation, hours and earnings.