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Politics in the family: Nepotism and the hiring decisionsof Italian firms

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  • Manacorda, Marco
  • Gagliarducci, Stefano

Abstract

In this paper we investigate the effect of family connections to politicians on individuals’ labor market outcomes. We combine data for Italy over almost three decades from longitudinal social security records on a random sample of around 1 million private sector employees with the universe of around 500,000 individuals ever holding political office, and we exploit information available in both datasets on a substring of each individual’s last name and municipality of birth in order to identify family ties. Using a diff-in-diff analysis that follows individuals as their family members enter and leave office, and correcting for the measurement error induced by our fuzzy matching method, we estimate that the monetary return to having a politician in the family is around 3.5 percent worth of private sector earnings and that each politician is able to extract rents for his family worth between one fourth and one full private sector job per year. The effect of nepotism is long lasting, extending well beyond the period in office. Consistent with the view that this is a technology of rent appropriation on the part of politicians, the effect increases with politicians’ clout and with the resources available in the administration where they serve.

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  • Manacorda, Marco & Gagliarducci, Stefano, 2016. "Politics in the family: Nepotism and the hiring decisionsof Italian firms," LSE Research Online Documents on Economics 66440, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:66440
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    6. Benjamin Monnery, 2019. "Collaborateurs, emplois familiaux et niveau d’activité des parlementaires français," Revue économique, Presses de Sciences-Po, vol. 70(1), pages 5-29.
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    9. Christophe Lévêque, 2020. "Political connections, political favoritism and political competition: evidence from the granting of building permits by French mayors," Public Choice, Springer, vol. 184(1), pages 135-155, July.
    10. Guglielmo Barone & Guido de Blasio & Elena Gentili, 2020. "Politically connected cities: Italy 1951-1991," Working Papers wp1158, Dipartimento Scienze Economiche, Universita' di Bologna.
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    12. Marco Bertoni & Giorgio Brunello & Lorenzo Cappellari & Maria De Paola, 2023. "The long-run earnings effects of winning a mayoral election," LISER Working Paper Series 2023-02, Luxembourg Institute of Socio-Economic Research (LISER).
    13. Raitano, Michele & Vona, Francesco, 2021. "Nepotism vs. Specific Skills: The effect of professional liberalization on returns to parental background of Italian lawyers," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 489-505.
    14. Piasenti, Stefano & Valente, Marica & Van Veldhuizen, Roel & Pfeifer, Gregor, 2023. "Does Unfairness Hurt Women? The Effects of Losing Unfair Competitions," Working Papers 2023:7, Lund University, Department of Economics.
    15. Daniele, Gianmarco & Romarri, Alessio & Vertier, Paul, 2021. "Dynasties and policymaking," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 89-110.
    16. Gille, Véronique, 2018. "Applying for social programs in India: Roles of local politics and caste networks in affirmative action," Journal of Comparative Economics, Elsevier, vol. 46(2), pages 436-456.
    17. Emanuela Ghignoni, 2017. "Who do you know or what do you know? Informal recruitment channels, family background and university enrolments," Working Papers in Public Economics 179, University of Rome La Sapienza, Department of Economics and Law.
    18. Barbosa, Klenio & Ferreira, Fernando, 2023. "Occupy government: Democracy and the dynamics of personnel decisions and public finances," Journal of Public Economics, Elsevier, vol. 221(C).
    19. Salome Baslandze, 2018. "Connecting to Power: Political Connections, Innovation, and Firm Dynamics," 2018 Meeting Papers 1036, Society for Economic Dynamics.
    20. Stéphane Benveniste, 2024. "Political and Business Dynasties: a Social Gradient in Returns to Elite Education," AMSE Working Papers 2410, Aix-Marseille School of Economics, France.
    21. Florio, Erminia & Manfredonia, Stefano, 2021. "Ancestors, inter-generational transmission of attitudes, and corporate performance: Evidence from the Italian Mass Migration," GLO Discussion Paper Series 830, Global Labor Organization (GLO).
    22. Riccardo Ciacci & María Micaela María, 2020. "The Effects of Adult Entertainment Establishments on Sex Crime: Evidence from New York City," Working Papers 2020-44, Princeton University. Economics Department..
    23. Oosterlinck, Kim & Lacroix, Jean & Méon, Pierre-Guillaume, 2019. "A Positive Effect of Political Dynasties: the Case of France’s 1940 Enabling Act," CEPR Discussion Papers 13871, C.E.P.R. Discussion Papers.
    24. Perez-Vincent, Santiago M., 2023. "A few signatures matter: Barriers to entry in Italian local politics," European Journal of Political Economy, Elsevier, vol. 78(C).
    25. Arild Engelsen Ruud & Kenneth Bo Nielsen, 2018. "Political Dynasticism: Networks, Trust, Risk," Studies in Indian Politics, , vol. 6(2), pages 157-167, December.

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    More about this item

    Keywords

    nepotism; family connections; politics; rent appropriation;
    All these keywords.

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions

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