The Doughboys Network: Social Interactions and the Employment of World War I Veterans (pdf)

This paper examines how involuntarily-formed social networks affect individual labor market outcomes. Using a new dataset of 1,730 WWI draftees linked to the 1930 census, I identify the effect of a military company's postwar employment on a veteran's employment. The marginal effect of a one-percentage-point increase in his peers' unemployment rate, all else equal, decreases a veteran's likelihood of employment by one-half of a percentage point. I develop a new framework which allows for decomposing the effect into its two components, the endogenous ("the effect of others' outcomes"), and the contextual ("the effect of others' characteristics"). In this setting, I find the endogenous effect to be much stronger.