Social effects in employer learning: An analysis of siblings

Neel Rao

Labour Economics, 2016, vol. 38, issue C, 24-36

Abstract: This paper examines whether wages are based on information about personal contacts. I develop a theory of labor markets with imperfect information in which related workers have correlated abilities. I study wage setting under two alternative processes: individual learning, under which employers observe only a worker's own characteristics, and social learning, under which employers also observe those of a relative. Using sibling data from the NLSY79, I test for a form of statistical nepotism in which a sibling's performance is priced into a worker's wage. Empirically, an older sibling's test score has a larger impact on a younger sibling's log wage than a younger sibling's test score has on an older sibling's log wage. The estimates provide strong support for social effects in employer learning.

Keywords: Employer learning; Human capital; Sibling data; Social effects; Wage setting (search for similar items in EconPapers)
JEL-codes: C31 D83 D85 J24 J31 J71 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:38:y:2016:i:c:p:24-36

DOI: 10.1016/j.labeco.2015.11.001

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