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Favoritism

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  • Yann Bramoullé
  • Sanjeev Goyal

Abstract

Favoritism is the act of offering jobs, contracts and resources to members of one's social group in preference to outsiders. Favoritism is widely practiced and this motivates an exploration of its origins and economic consequences. Our main finding is that individuals have an interest to trade favors over time and that this will come at the expense of others, who are outside their group. We show that favoritism is relatively easier to sustain in smaller groups. Favoritism entails social costs as it usually leads to inefficient allocations. However, favoritism can lead to payoff advantages for larger groups. Productivity enhancing investments are larger in groups which practice favoritism. The availability of investment opportunities can reinforce payoff inequalities across groups.

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File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2009/CIRPEE09-41.pdf
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Bibliographic Info

Paper provided by CIRPEE in its series Cahiers de recherche with number 0941.

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Date of creation: 2009
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Handle: RePEc:lvl:lacicr:0941

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Keywords: Favoritism; nepotism; reciprocity; repeated games;

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