Wage Effects of Recruitment Methods: The Case of the Italian Social Service Sector

Michele Mosca () and Francesco Pastore ()
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Michele Mosca: University of Naples, Federico II

No 3422, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: This paper uses a unique data set containing detailed micro-information on organisations, managers, workers and volunteers belonging to public, private forprofit and private nonprofit institutions delivering social services in Italy. The analysis aims to estimate the determinants of wages across organisations at a sector level focusing on the role of hiring and job search methods, including informal networks. We find that, independent of the organisation type, being hired through public competitions brings with it a substantial wage premium (ranging from 7 to 32%). Informal networks bring with them a wage penalty (-6.5%) in the state sector, where formal hiring methods are common, and a wage premium (6.3%) in social cooperatives and religious institutions, where formal hiring methods are not common. Interestingly, the differences in hiring and in job search methods between state and private organisations explain from 50% to 100% of the conditional wage differentials across organisation types. Our interpretation of these findings is that nonprofit organisations prefer informal recruitment methods not for nepotistic reasons, but to better select the most motivated workers, those who share the nonprofit mission. This paper adds to the previous literature by suggesting that in addition to lower than average monetary compensations, informal recruitment methods are part of the process of self-selection of motivated workers in nonprofit organisations.

Keywords: informal networks; social services; earnings functions; nonprofit organisations; Italy (search for similar items in EconPapers)
JEL-codes: I11 J31 J41 L31 L33 L84 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab and nep-soc
Date: Written 2008-03
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Forthcoming in: Sergio Destefanis and Marco Musella (eds.), Paid and Unpaid Labour in Social Utility Services, Heidelberg: Physica Verlag, 2008

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