Personal Networks and Nonagricultural Employment: The Case of a Farming Village in the Philippines

This article, based on an intensive village survey in the Philippines, analyzes the effects of personal networks on rural villagers’ access to nonagricultural occupations and the terms of employment given to them. A key finding is that personal networks are selectively used to reduce transaction costs and their impacts on employment conditions vary by size and by location of enterprises. We find that when villagers are employed in unskilled work at small enterprises, those who use family/relative networks receive wage premiums. However, if we limit our sample to small enterprises located near our study village, the family/relative network premiums become insignificant, presumably because of the overriding influence of the community-wide network within a narrow local community. Contrary to the case of small enterprises, unskilled workers’ wages at large enterprises are not much affected by personal networks but are largely determined by years of schooling and work experience. The recent development of large-scale enterprises in the Philippines shows the diminishing importance of personal networks for unskilled labor markets, reflecting the tendency that acquired ability through education and training is becoming more important than nascent characteristics such as family/relative networks, corresponding to economic and social modernization.