The Role of Social Networks in Explaining Benefit Receipt across Ethnic Groups

Much research has focused on explaining the differences that have been observed in most Western countries in the labor market outcomes - including benefit receipt - of native people and first- and second-generation migrants. Empirical studies from the Netherlands show that around 50 percent of the native-migrant difference in benefit receipt can be explained by accounting for compositional differences in socio-economic characteristics. Theoretically, this is typically related to unevenly distributed human capital across the ethnic groups, selective immigration policies, and labor market segmentation. Less is known about to what extent social networks and social capital can account for differences in benefit receipt between natives and people with a migrant background.

The aim of this study is to quantify the role of social networks in explaining the native-migrant differential in the receipt of social assistance, disability and unemployment benefits. We draw on research on (1) the role of social networks for benefit receipt, and research on (2) the role of social capital in explaining the labor market outcomes of ethnic, racial, and/or migrant groups, and expect that social networks will explain a significant part of the native-migrant difference in benefit receipt.

To investigate this we employ a unique combination of Dutch register and survey data. The register data provide the best way of measuring individual benefit receipt, which is often under-reported in surveys, while the latter contain a wide range of social network indicators. A particular novel feature is that we can test to what extent the impact of social capital in the neighborhood (a register-data measure) varies by contact with neighbors (a survey-data measure). The combination of data sources sheds new light on the theoretical mechanisms underlying social network effects in benefit receipt among different ethnic groups.