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Do ties affect your wage?

This study investigates the impact of informal ties on wage outcomes, utilizing data from the BSPS-SME survey. It examines traditional determinants of wages while emphasizing the role of recruitment ties—both manager and worker ties—in influencing earnings. The analysis reveals significant effects of informal contacts on wages, highlighting the importance of occupational and locational factors. Our findings suggest that manager ties influence wages through occupation, whereas worker ties operate within occupations, indicating a nuanced understanding of informal networks in labor markets.

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Do ties affect your wage?

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  1. Do ties affect your wage? Applying the BSPS-SME matched employer-employee data

  2. Outline • Introduction • Theory • Empirical strategy • Results • Conclusion

  3. Introduction • Traditional wage determinants • Informal contacts in the labour market (Rees, 1966) • Recruitment ties (Granovetter, 1973) • Manager tie (34 pct) • Worker tie (24 pct) • Mechanism through which ties affect wages

  4. Theory • Human capital (Mincer, 1974) • Efficiency wage (Lazear, 1979) • Job search (Stigler,1970; Pissarides 2001)

  5. Data • BSPS SME data from 2007 • The subsample: • 426 enterprises • 753 employees • 392 production workers • 76 managers

  6. Empirical strategy • Following Troske, 1999 • wi: real wage of worker i • Xi: vector of worker i’s characteristics • Zi: vector of firm characteristics of worker i's employer • Ti: vector of the recruitment tie of worker i • ui: worker-specific error term.

  7. Dependent variable

  8. Explanatory variables - employee Traditional wage determinants • Education • Experience (years in firm, age) • Gender • Union membership • Occupation • Recruitment ties

  9. Occupation and ties

  10. Explanatory variables - firm • Size • Legal status • Sector • Province • Manager education • Share of professional workers • Share of female workers • Other labour costs

  11. Results – employee characteristics

  12. Results – informal recruitment

  13. How do ties affect wages? Manager tie Employee and firm char. Wage Occupation Worker tie

  14. Sensitivity analysis • Sensitivity analysis • Occupation* • Sector • Location*

  15. Occupation

  16. Location

  17. Location – urban provinces only

  18. Conclusion • Traditional wage determinants significant • Informal contacts matter! • Manager tie works through occupation • Worker tie works within occupation • Large differences across location • Future work – explain productivity

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