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Wage Effects of Recruitment Methods: The Case of the Italian Social Service Sector

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Author Info
Mosca, Michele () (University of Naples, Federico II)
Pastore, Francesco () (University of Naples II)

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Abstract

This paper uses a unique data set containing detailed micro-information on organisations, managers, workers and volunteers belonging to public, private forprofit and private nonprofit institutions delivering social services in Italy. The analysis aims to estimate the determinants of wages across organisations at a sector level focusing on the role of hiring and job search methods, including informal networks. We find that, independent of the organisation type, being hired through public competitions brings with it a substantial wage premium (ranging from 7 to 32%). Informal networks bring with them a wage penalty (-6.5%) in the state sector, where formal hiring methods are common, and a wage premium (6.3%) in social cooperatives and religious institutions, where formal hiring methods are not common. Interestingly, the differences in hiring and in job search methods between state and private organisations explain from 50% to 100% of the conditional wage differentials across organisation types. Our interpretation of these findings is that nonprofit organisations prefer informal recruitment methods not for nepotistic reasons, but to better select the most motivated workers, those who share the nonprofit mission. This paper adds to the previous literature by suggesting that in addition to lower than average monetary compensations, informal recruitment methods are part of the process of self-selection of motivated workers in nonprofit organisations.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3422.

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Date of creation: Mar 2008
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Publication status: forthcoming in: Sergio Destefanis and Marco Musella (eds.), Paid and Unpaid Labour in Social Utility Services, Heidelberg: Physica Verlag, 2008
Handle: RePEc:iza:izadps:dp3422

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Related research
Keywords: informal networks; social services; earnings functions; nonprofit organisations; Italy;

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Find related papers by JEL classification:
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out
L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services

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