IZA DP No. 3668: Local Social Capital and Geographical Mobility: A Theory
merged with DP 3669 into "Social Capital, Mobility and Unemployment in Europe", published in: Journal of Urban Economics, 2010, 68 (2), 191-204
In this paper, we attempt to understand the determinants of mobility by introducing the concept of local social capital. Investing in local ties is rational when workers anticipate that they will not move to another region. Reciprocally, once local social capital is accumulated, incentives to move are reduced. Our model illustrates several types of complementarity leading to multiple equilibria (a world of local social capital and low mobility vs. a world of low social capital and high propensity to move). It also shows that local social capital is systematically negative for mobility, and can be negative for employment, but some other types of social capital can actually raise employment.