Complex Systems and a Computational Social Science Perspective on the Labor Market

TL;DR

This paper advocates for using computational social science and network analysis to understand labor market dynamics, emphasizing the role of opportunity flow through weak ties and activity clusters in influencing unemployment and economic growth.

Contribution

It introduces a framework combining network science and data-driven theories to measure opportunity flow and its impact on unemployment and economic activity clusters.

Findings

Opportunity flow through weak ties influences unemployment duration.

Clusters of related economic activities facilitate greater opportunity flow.

Enhanced opportunity flow correlates with increased economic growth.

Abstract

Labor market institutions are central for modern economies, and their polices can directly affect unemployment rates and economic growth. At the individual level, unemployment often has a detrimental impact on people's well-being and health. At the national level, high employment is one of the central goals of any economic policy, due to its close association with national prosperity. The main goal of this thesis is to highlight the need for frameworks that take into account the complex structure of labor market interactions. In particular, we explore the benefits of leveraging tools from computational social science, network science, and data-driven theories to measure the flow of opportunities and information in the context of the labor market. First, we investigate our key hypothesis, which is that opportunity/information flow through weak ties, and this is a key determinant of the length of unemployment. We then extend the idea of opportunity/information flow to clusters of other economic activities, where we expect the flow within clusters of related activities to be higher than within isolated activities. This captures the intuition that within related activities there are more "capitals" involved and that such activities require similar "capabilities." Therefore, more extensive clusters of economic activities should generate greater growth through exploiting the greater flow of opportunities and information. We quantify the opportunity/information flow using a complexity measure of two economic activities (i.e. jobs and exports).