The Use of Informal Networks in Italian Labor Markets: Efficiency or Favoritisms?

Michela Ponzo and Vincenzo Scoppa ()

MPRA Paper from University Library of Munich, Germany

Abstract: A number of papers considers the use of informal networks (the help of relatives, friends and acquaintances) to find an employment as an efficient mechanism to match workers to jobs. However, evidence in Italy shows that informal networks tend to be used more in less productive jobs and less developed regions. We aim to show that informal networks – rather than being an efficient channel of information transmission – may interfere with a genuine process of selection of workers, favoring socially connected people in place of more talented workers. Using the Bank of Italy Survey on Household Income and Wealth (SHIW) we estimate with a Probit model the determinants of the probability of using informal networks. We find that informal networks tend to be used by low educated individuals, in low productivity jobs, in high unemployment areas, where opportunistic behavior are widespread and in jobs paying a wage rent. We offer a stripped-down model of nepotism to explain theoretically these findings.

Keywords: Keywords: Informal Networks, Favoritism; Nepotism; Italian Labour Markets (search for similar items in EconPapers)
JEL-codes: D73 J24 J31 J71 M51 (search for similar items in EconPapers)
Date: 2008-10-15
New Economics Papers: this item is included in nep-hrm, nep-lab, nep-net and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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