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Social networks and wages in Senegal’s formal sector

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  • Berardi, N.

Abstract

We develop a theoretical framework that considers the role played by moral hazard and the diversity of networks and cultures in the choice of hiring channel. In favoritism contexts social networks, and particularly strong ties, are adopted as hiring channels for unskilled jobs and result in wage penalties, while otherwise the opposite happens. We estimate an endogenous switching model for the case of Senegal's manufacturing formal sector and find, consistently with our theoretical predictions in case of favoritism, that informal hiring channels are preferred to fill unskilled vacancies and are associated with a wage penalty, especially when ties are stronger.

Suggested Citation

  • Berardi, N., 2013. "Social networks and wages in Senegal’s formal sector," Working papers 429, Banque de France.
  • Handle: RePEc:bfr:banfra:429
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    References listed on IDEAS

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    1. Barr, Abigail & Oduro, Abena, 2002. "Ethnic fractionalization in an African labour market," Journal of Development Economics, Elsevier, vol. 68(2), pages 355-379, August.
    2. Fontaine, François, 2008. "Why are similar workers paid differently? the role of social networks," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 3960-3977, December.
    3. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    4. Marcel Fafchamps & Alexander Moradi, 2015. "Referral and Job Performance: Evidence from the Ghana Colonial Army," Economic Development and Cultural Change, University of Chicago Press, vol. 63(4), pages 715 - 751.
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    Cited by:

    1. Berardi, Nicoletta & Seabright, Paul, 2011. "Professional Network and Career Coevolution," CEPR Discussion Papers 8632, C.E.P.R. Discussion Papers.
    2. Bilyk Olga & Sheron Iuliia, 2012. "Do informal networks matter in the Ukrainian labor market?," EERC Working Paper Series 12/11e, EERC Research Network, Russia and CIS.
    3. Catia Nicodemo & Gustavo Adolfo García, 2015. "Job Search Channels, Neighborhood Effects, and Wages Inequality in Developing Countries: The Colombian Case," The Developing Economies, Institute of Developing Economies, vol. 53(2), pages 75-99, June.
    4. Rebien, Martina & Stops, Michael & Zaharieva, Anna, 2017. "Formal search and referrals from a firm's perspective," Center for Mathematical Economics Working Papers 578, Center for Mathematical Economics, Bielefeld University.
    5. Yogo, Urbain Thierry, 2011. "Social Network and Job Quality: Evidence from Cameroon," MPRA Paper 44936, University Library of Munich, Germany.

    More about this item

    Keywords

    Social networks; Hiring channel; Wage differential.;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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