Is Nepotism Inevitable Under Search and Matching Friction?

Mazumder, Debojyoti and Biswas, Rajit (2018): Is Nepotism Inevitable Under Search and Matching Friction?

Abstract

The present article develops a search and matching framework to model political nepotism in the job market. The model argues that labor market friction generates incentives for the political leaders to provide nepotism under a democratic set up. Both the leaders optimally choose nepotism when the labor market friction is higher. It is shown that even for a relatively lesser labor market friction at least one leader would always choose nepotism. The results of the basic model remain robust in an extension where followers can pay a price and choose their allegiance, to any one of the political parties.

• Item Type: MPRA Paper
• Language: English
• Keywords: search and matching, nepotism, political regime change
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J64 - Unemployment: Models, Duration, Incidence, and Job Search; J - Labor and Demographic Economics > J7 - Labor Discrimination > J71 - Discrimination

References

Asher, S., & Novosad, P. (2015). Politics and Local Economic Growth: Evidence from India. American Economic Jouurnal, 9, 229-273.

Bentolila, S., Michelacci, C., & Suarez, J. (2010). Social contacts and occupational choice. Economica, 77(305), 20-45.

Besley, T., \& Persson, T. (2010). State Capacity, Conflict, and Development, Econometrica, Vol. 78, No. 1, pp. 1-34

Bradshaw, T. F. (1973). Jobseeking methods used by unemployed workers. Monthly Lab. Rev., 96, 35.

Charlot, O., & Decreuse, B. (2005). Self-selection in education with matching frictions. Labour Economics, 12(2), 251-267.

Elliott, J. R. (1999). Social isolation and labor market insulation: Network and neighborhood effects on less-educated urban workers. The Sociological Quarterly, 40(2), 199-216.

Fafchamps, M., & Labonne, J. (2017). Do Politicians’ Relatives Get Better Jobs? Evidence from Municipal Elections. The Journal of Law, Economics, and Organization, 33, 268-300.

Fontaine, F. (2007). A simple matching model with social networks. Economics Letters, 94(3), 396-401.

Galeotti, A., & Merlino, L. P. (2014). Endogenous job contact networks. International economic review, 55(4), 1201-1226.

Hsieh, C.T., Edward, M., Ortega, D.,,Rodriguez, F. (2011). The Price of Political Opposition: Evidence from Venezuela’s Maisanta. American Economic Journal: Applied Economics, 3, 196-214.

Ioannides, Y. M., & Datcher Loury, L. (2004). Job information networks, neighborhood effects, and inequality. Journal of economic literature, 42(4), 1056-1093.

Marmaros, D., & Sacerdote, B. (2002). Peer and social networks in job search. European economic review, 46(4-5), 870-879.

Oesch, D., & von Ow, A. (2017). Social Networks and Job Access for the Unemployed: Work Ties for the Upper-Middle Class, Communal Ties for the Working Class. European Sociological Review, 33(2), 275-291.

Pissarides, Christopher A. Equilibrium unemployment theory. MIT press, 2000.

Ports, M. H. (1993). Trends in job search methods, 1970-92. Monthly Labor Review, 116(10), 63-68.

Rueda, D. (2006). Social Democracy and Active Labour-Market Policies: Insiders, Outsiders and the Politics of Employment Promotion, 36, 385-406.

Rueda, D. (2005). Insider-Outsider Politics in Industrialized Democracies: The Challenge to Social Democratic Parties, 99, 61-74.

Simon, C. J., & Warner, J. T. (1992). Matchmaker, matchmaker: The effect of old boy networks on job match quality, earnings, and tenure. Journal of labor economics, 10(3), 306-330.

Stevens, M. (2007). New microfoundations for the aggregate matching function. International Economic Review, 48(3), 847-868.

Tumen, S. (2016). Informal versus formal search: Which yields better pay?. International Journal of Economic Theory, 12(3), 257-277.