Social Networks and Wages in Senegal's Formal Sector
42 Pages Posted: 30 Mar 2013
Date Written: March 1, 2013
Abstract
We develop a theoretical framework that considers the role played by moral hazard and the diversity of networks and cultures in the choice of hiring channel. In favoritism contexts social networks, and particularly strong ties, are adopted as hiring channels for unskilled jobs and result in wage penalties, while otherwise the opposite happens. We estimate an endogenous switching model for the case of Senegal's manufacturing formal sector and find, consistently with our theoretical predictions in case of favoritism, that informal hiring channels are preferred to fill unskilled vacancies and are associated with a wage penalty, especially when ties are stronger.
Nous developpons un cadre theorique prenant en compte le r^ole joue par l'alea moral et la diversite de reseaux et cultures dans le choix du canal d'embauche. Dans des contextes de favoritisme, les reseaux sociaux, et particuliµerement les liens forts, sont adoptes comme canaux d'embauche pour des postes peu qualifies et impliquent des penalites salariales, tandis que le contraire arrive autrement. Nous estimons un modµele de changement de regimes endogµene pour le cas du secteur manufacturier formel Senegalais et trouvons que, de facon coherente avec les predictions du modµele theorique dans le cas de favoritisme, les canaux d'embauche informels sont preferes pour des postes peu qualies et sont associes avec des penalites salariales, particuliµerement quand les liens sont forts.
Keywords: Social networks, Hiring channel, Wage differential
JEL Classification: O12, J31
Suggested Citation: Suggested Citation
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