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The Brother in Law Effect

Author

Listed:
  • David K Levine
  • Federico Weinschelbaum
  • Felipe Zurita

    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

Abstract

Ordinarily labor market equilibrium implies that the marginal worker is indifferent to employment, and that the employer is indifferent between equally productive employees. When the marginal worker is indifferent to employment, employer preferences do not matter. If, however, the marginal worker strictly prefers to be employed, the employer can give favors, and may wish to do so even at some cost to efficient production. Not only may inefficient workers be employed, but the employer may also choose to employ too many workers. We refer to this as the brother-in law effect. When the brother-in-law effect is due to unionization, employment of brothers-inlaw leads to increased employment – under some circumstances leading even to over employment relative to the workforce that would be employed without unionization. If the employment effect is strong – because brothers-in-law are relatively good workers – nepotism improves efficiency. If the employment effect is weak – including in principalagent models where there are informational rents – nepotism is inefficient.

Suggested Citation

  • David K Levine & Federico Weinschelbaum & Felipe Zurita, 2005. "The Brother in Law Effect," Documentos de Trabajo 303, Instituto de Economia. Pontificia Universidad Católica de Chile..
  • Handle: RePEc:ioe:doctra:303
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    File URL: http://www.economia.uc.cl/docs/dt_303.pdf
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    Other versions of this item:

    • David K. Levine & Federico Weinschelbaum & Felipe Zurita, 2010. "The Brother-In-Law Effect," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 497-507, May.

    References listed on IDEAS

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    Cited by:

    1. Natalia Montinari & Antonio Nicolò & Regine Oexl, 2016. "The gift of being chosen," Experimental Economics, Springer;Economic Science Association, vol. 19(2), pages 460-479, June.
    2. Agnieszka Rusinowska & Vassili Vergopoulos, 2016. "Ingratiation and Favoritism in Organizations," Post-Print halshs-01278060, HAL.
    3. Bramoullé, Yann & Goyal, Sanjeev, 2016. "Favoritism," Journal of Development Economics, Elsevier, vol. 122(C), pages 16-27.
    4. Rafael Di Tella & Federico Weinschelbaum, 2008. "Choosing Agents and Monitoring Consumption: A note on Wealth as a Corruption‐Controlling Device," Economic Journal, Royal Economic Society, vol. 118(532), pages 1552-1571, October.
    5. Valeria Maggian & Natalia Montinari & Antonio Nicol�, 2018. "Backscratching in Hierarchical Organizations," Journal of Law, Economics, and Organization, Oxford University Press, vol. 34(2), pages 133-161.
    6. Ponzo, Michela & Scoppa, Vincenzo, 2011. "A simple model of favouritism in recruitment," Research in Economics, Elsevier, vol. 65(2), pages 78-88, June.
    7. Zudenkova, Galina, 2011. "Cronyism in Business, Public Sector and Politics," MPRA Paper 30231, University Library of Munich, Germany.
    8. Duran Miguel A. & Morales Antonio J., 2014. "The Rise and Spread of Favoritism Practices," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 14(1), pages 1-18, January.
    9. Roberto Cortes Conde, 2008. "Spanish America Colonial Patterns: The Rio de La Plata," Working Papers 96, Universidad de San Andres, Departamento de Economia, revised Mar 2008.
    10. Natalia Montinari & Antonio Nicolo & Regine Oexl, 2012. "Mediocrity and induced reciprocity," Working Papers 2012-19, Faculty of Economics and Statistics, University of Innsbruck.
    11. Balletta, Luigi & Modica, Salvatore, 2018. "Selection by committee: Anonymity and gratitude," Research in Economics, Elsevier, vol. 72(4), pages 511-517.
    12. Galina Zudenkova, 2015. "Political cronyism," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 44(3), pages 473-492, March.
    13. Agnieszka Rusinowska & Vassili Vergopoulos, 2020. "Ingratiation and Favoritism in Organizations," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 176(3), pages 413-445.

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