The Use of Informal Networks in Italy: Efficiency or Favoritism?

Michela Ponzo and Vincenzo Scoppa ()

MPRA Paper from University Library of Munich, Germany

Abstract: A large body of literature considers the advantages of using informal networks to match workers to jobs. However, family ties may interfere with a genuine process of worker selection, favoring people with connections over more talented workers. We offer a simple model of favoritism to explain these risks and show firms’ trade-off in using informal channels. We then investigate empirically the determinants and consequences of using informal networks in Italy by using the Bank of Italy Survey. We find that informal networks tend to be used by low educated individuals, in small firms, in low productivity jobs and in less developed regions. Finally, we show that informal networks have a negative impact on wages, controlling for individual and firm characteristics.

Keywords: Informal Networks, Favoritism; Nepotism; Earnings functions; Survey of Household Income and Wealth (SHIW) (search for similar items in EconPapers)
JEL-codes: D73 J24 M51 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-lab and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: The use of informal networks in Italy: Efficiency or favoritism? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:17281

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