Should I Stay or Should I Go? Regional Mobility and Social Capital

This paper explores the effect of social capital on mobility, and the role of mobility in the decision to invest in social capital. At the end of a period, in which individuals work and invest in regionally immobile social capital, there may be an income shock. Given a negative shock, individuals have to decide whether to move so they can maintain their income but lose social capital, or to stay in the region, accepting the income loss but retaining their social capital. As a result, the effects of labour market shocks on mobility patterns depend on social environments.