This paper investigates whether individual transition rates from welfare to work are influenced by neighborhood effects. We use a unique administrative database on welfare recipients in Rotterdam, the second largest city of The Netherlands. We find that conditional on personal characteristics there is a negative relationship between the neighborhood unemployment rate and the transition rate from welfare to work of young Dutch welfare recipients. We do not find any neighborhood effects for older Dutch welfare recipients and non-Dutch welfare recipients. When performing some sensitivity analyses this result is robust to different specifications. © 2001 Elsevier Science B.V. All rights reserved.