IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The use of informal networks in Italy: Efficiency or favoritism?

  • Ponzo, Michela
  • Scoppa, Vincenzo

A large body of literature considers the advantages of using informal networks to match workers to jobs. However, family ties may interfere with a genuine process of worker selection, favoring people with connections over more talented workers. We offer a simple model of favoritism to explain these risks and show firms' trade-off in using informal channels. We then investigate empirically the determinants and consequences of using informal networks in Italy by using the Bank of Italy Survey. We find that informal networks tend to be used by low-educated individuals, in small firms, in low-productivity jobs and in less developed regions. Finally, we show that informal networks have a negative impact on wages, controlling for individual and firm characteristics.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/B6W5H-4WWG34D-2/2/63a3e6d330111c092f096156ac2d0c31
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

Volume (Year): 39 (2010)
Issue (Month): 1 (January)
Pages: 89-99

as
in new window

Handle: RePEc:eee:soceco:v:39:y:2010:i:1:p:89-99
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620175

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. De Paola, Maria & Scoppa, Vincenzo, 2003. "Family ties and training provision in an insider-outsider framework," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(2), pages 197-217, May.
  2. Michele Pellizzari, 2010. "Do Friends and Relatives Really Help in Getting a Good Job?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 63(3), pages 494-510, April.
  3. Prendergast, Canice & Topel, Robert H, 1996. "Favoritism in Organizations," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 958-78, October.
  4. Bernard F. Lentz & David N. Laband, 1989. "Why So Many Children of Doctors Become Doctors: Nepotism vs. Human Capital Transfers," Journal of Human Resources, University of Wisconsin Press, vol. 24(3), pages 396-413.
  5. Federico Cingano & Alfonso Rosolia, 2006. "People I Know: Workplace Networks and Job Search Outcomes," Temi di discussione (Economic working papers) 600, Bank of Italy, Economic Research and International Relations Area.
  6. Alesina, Alberto & Giuliano, Paola, 2007. "The Power of the Family," IZA Discussion Papers 2750, Institute for the Study of Labor (IZA).
  7. Samuel Bentolila & Claudio Michelacci & Javier Suarez, 2004. "Social Contacts And Occupational Choice," Working Papers wp2004_06, CEMFI.
  8. Laband, David N & Lentz, Bernard F, 1992. "Self-Recruitment in the Legal Profession," Journal of Labor Economics, University of Chicago Press, vol. 10(2), pages 182-201, April.
  9. John T. Addison & Pedro Portugal, 2002. "Job search methods and outcomes," Oxford Economic Papers, Oxford University Press, vol. 54(3), pages 505-533, July.
  10. Andrei Shleifer & Fausto Panunzi & Mike Burkart, 2002. "Family Firms," FMG Discussion Papers dp406, Financial Markets Group.
    • Mike Burkart & Fausto Panunzi & Andrei Shleifer, 2003. "Family Firms," Journal of Finance, American Finance Association, vol. 58(5), pages 2167-2202, October.
  11. Francis Kramarz & David Thesmar, 2013. "Social Networks In The Boardroom," Journal of the European Economic Association, European Economic Association, vol. 11(4), pages 780-807, 08.
  12. Michela Ponzo & Vincenzo Scoppa, 2010. "A Simple Model Of Nepotism," Working Papers 201017, Università della Calabria, Dipartimento di Economia, Statistica e Finanza (Ex Dipartimento di Economia e Statistica).
  13. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-79, July.
  14. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  15. Saloner, Garth, 1985. "Old Boy Networks as Screening Mechanisms," Journal of Labor Economics, University of Chicago Press, vol. 3(3), pages 255-67, July.
  16. Imran Rasul & Iwan Barankay & Orana Bandiera, 2006. "Incentives for managers and inequality among workers: Evidence from a firm level experiment," Natural Field Experiments 00213, The Field Experiments Website.
  17. Francisco Pérez-González, 2006. "Inherited Control and Firm Performance," American Economic Review, American Economic Association, vol. 96(5), pages 1559-1588, December.
  18. Peter A. Groothuis & Jana D. Groothuis, 2008. "Nepotism or Family Tradition? A Study of NASCAR Drivers," Journal of Sports Economics, , vol. 9(3), pages 250-265, June.
  19. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The Role of Social Capital in Financial Development," American Economic Review, American Economic Association, vol. 94(3), pages 526-556, June.
  20. Montgomery, James D, 1991. "Social Networks and Labor-Market Outcomes: Toward an Economic Analysis," American Economic Review, American Economic Association, vol. 81(5), pages 1407-18, December.
  21. Acemoglu, Daron & Pischke, Jörn-Steffen, 1998. "The Structure of Wages and Investment in General Training," CEPR Discussion Papers 1833, C.E.P.R. Discussion Papers.
  22. Datcher, Linda, 1983. "The Impact of Informal Networks of Quit Behavior," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 491-95, August.
  23. Adriana Kugler, 2002. "Employee referrals and efficiency wages," Economics Working Papers 647, Department of Economics and Business, Universitat Pompeu Fabra.
  24. Matthew S. Goldberg, 1982. "Discrimination, Nepotism, and Long-Run Wage Differentials," The Quarterly Journal of Economics, Oxford University Press, vol. 97(2), pages 307-319.
  25. Mauro Sylos Labini, 2004. "Social Networks and Wages: It's All About Connections!," LEM Papers Series 2004/10, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  26. Andrea Ichino & Giovanni Maggi, 2000. "Work Environment and Individual Background: Explaining Regional Shirking Differentials in a Large Italian Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 1057-1090.
  27. Holzer, Harry J, 1987. "Informal Job Search and Black Youth Unemployment," American Economic Review, American Economic Association, vol. 77(3), pages 446-52, June.
  28. Vincenzo Scoppa, 2009. "Intergenerational transfers of public sector jobs: a shred of evidence on nepotism," Public Choice, Springer, vol. 141(1), pages 167-188, October.
  29. Andrea Ichino & Giovanni Maggi, 1999. "Work Environment and Individual Background: Explaining Regional Shirking Differentials in a Large Italian Firm," NBER Working Papers 7415, National Bureau of Economic Research, Inc.
  30. Yannis M. Ioannides & Linda Datcher Loury, 2002. "Job Information Networks, Neighborhood Effects and Inequality," Discussion Papers Series, Department of Economics, Tufts University 0217, Department of Economics, Tufts University.
  31. Samuel Bentolila & Andrea Ichino, 2008. "Unemployment and consumption near and far away from the Mediterranean," Journal of Population Economics, Springer, vol. 21(2), pages 255-280, April.
  32. Edward P. Lazear & Paul Oyer, 2007. "Personnel Economics," NBER Working Papers 13480, National Bureau of Economic Research, Inc.
  33. Morten Bennedsen & Kasper Meisner Nielsen & Francisco Perez-Gonzalez & Daniel Wolfenzon, 2007. "Inside the Family Firm: The Role of Families in Succession Decisions and Performance," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 647-691.
  34. Holzer, Harry J, 1988. "Search Method Use by Unemployed Youth," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 1-20, January.
  35. David G. Blanchflower & Alex Bryson, 2003. "What Effect do Unions Have on Wages Now and Would 'What Do Unions Do' Be Surprised?," NBER Working Papers 9973, National Bureau of Economic Research, Inc.
  36. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  37. De Paola, Maria & Scoppa, Vincenzo, 2005. "The Role of Family Ties in the Labour Market. An Interpretation Based on Efficiency Wage Theory," MPRA Paper 8956, University Library of Munich, Germany.
  38. Spagnolo, Giancarlo, 1999. "Social relations and cooperation in organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 1-25, January.
  39. Marianne Bertrand & Antoinette Schoar, 2006. "The Role of Family in Family Firms," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 73-96, Spring.
  40. Simon, Curtis J & Warner, John T, 1992. "Matchmaker, Matchmaker: The Effect of Old Boy Networks on Job Match Quality, Earnings, and Tenure," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 306-30, July.
  41. Luigi Pistaferri, 1999. "Informal Networks in the Italian Labor Market," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 58(3-4), pages 355-375, December.
  42. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  43. Gregory, Robert G. & Borland, Jeff, 1999. "Recent developments in public sector labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 53, pages 3573-3630 Elsevier.
  44. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:soceco:v:39:y:2010:i:1:p:89-99. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.