The externality cost of neighbour’s at work: social norm induced effects on well-being

Publication type

Research Paper


Peter Howley and Sarah Knight

Publication date

Series Number



This article tests for social-norm effects in labour market status. We extend previous research which has examined the relationship between aggregate unemployment and well-being as a mechanism for uncovering social-norm effects, by using a more spatially disaggregated (neighbourhood as opposed to regional) measure of unemployment. Our fixed effects regression results indicate that while unemployment hurts, it hurts much less when individuals live in neighbourhoods where the prevailing rate of unemployment is high. In keeping with the social-norm hypothesis, we also find that unemployment hurts less when individuals think of themselves as being similar to their neighbours.


Area Effects, Social Networks, Labour Market, Unemployment, Well Being and Social Psychology