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Social networks and wages in Senegal’s formal sector

Listed author(s):
  • Berardi, N.

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.

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File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/working-paper_429_2013.pdf
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Paper provided by Banque de France in its series Working papers with number 429.

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Length: 42 pages
Date of creation: 2013
Handle: RePEc:bfr:banfra:429
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Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS

Web page: http://www.banque-france.fr/

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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. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
  3. 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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