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A Simple Model Of Nepotism

Author

Listed:
  • Michela Ponzo

  • Vincenzo Scoppa

    (Dipartimento di Economia e Statistica, Università della Calabria)

Abstract

This paper analyses theoretically favouritism in recruitment decisions. We study the investments in connections by applicants for jobs which pay a wage rent and the behaviour of public or private managers intending to favour the recruitment of connected agents in place of more competent candidates. Key elements in determining favouritism are the delegation of recruitment decisions and unverifiable information regarding the skills of job applicants. We show in an agency framework that if the manager is “corruptible”, both low and high ability workers invest in connections and that nepotism is more widespread in jobs paying high wage-rents; in organisations in which “low-powered incentives” are used for managers; when firm performance is slightly sensitive to abilities; when it is easy to make hidden payments and the intensity of family ties is strong; when the uncertainty of connection process is low.

Suggested Citation

  • Michela Ponzo & Vincenzo Scoppa, 2010. "A Simple Model Of Nepotism," Working Papers 201017, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    • Handle: RePEc:clb:wpaper:201017
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    File URL: http://www.ecostat.unical.it/RePEc/WorkingPapers/WP17_2010.pdf
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    References listed on IDEAS

    as
    1. Combes, Pierre-Philippe & Linnemer, Laurent & Visser, Michael, 2008. "Publish or peer-rich? The role of skills and networks in hiring economics professors," Labour Economics, Elsevier, vol. 15(3), pages 423-441, June.
    2. Pierre-Philippe Combes & Laurent Linnemer & Michael Visser, 2008. "Publish or Peer-rich," Post-Print hal-00558189, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Ponzo, Michela & Scoppa, Vincenzo, 2008. "The Use of Informal Networks in Italian Labor Markets: Efficiency or Favoritisms?," MPRA Paper 11764, University Library of Munich, Germany.
    2. Ponzo, Michela & Scoppa, Vincenzo, 2010. "The use of informal networks in Italy: Efficiency or favoritism?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(1), pages 89-99, January.

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    More about this item

    Keywords

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    JEL classification:

    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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