Do ties affect your wage?

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