Who do you know or what do you know? Informal recruitment channels, family background and university enrolments

This paper deals with the role that an extensive use of informal networks to match workers to jobs can play in the university enrolments decisions of low socioeconomic status students in Italy.By applying estimation techniques with instrumental variables to ISTAT microdata, I found that upper-secondary students coming from lower social classes are less likely to participate in higher education when they live in provinces where the percentage of newly tertiary graduates who found a job thanks to the help of relatives, family connections or friends is higher. My results are consistent with the hypothesis that the wide diffusion of ‘favouritism’ in local labour markets engenders a sense of ‘economic despair’ among those who are poorly connected, thereby damaging individual human capital accumulation, inequality of access to higher education and local socio-economic development.