Politics in the Family Nepotism and the Hiring Decisions of Italian Firms

53 Pages Posted: 16 May 2016

See all articles by Stefano Gagliarducci

Stefano Gagliarducci

University of Rome, Tor Vergata - Faculty of Economics; Einaudi Institute for Economics and Finance (EIEF); IZA Institute of Labor Economics

Marco Manacorda

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); Queen Mary, University of London; Centre for Economic Policy Research (CEPR)

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Date Written: May 2016

Abstract

In this paper we investigate the effect of family connections to politicians on individuals' labor market outcomes. We combine data for Italy over almost three decades from longitudinal social security records on a random sample of around 1 million private sector employees with the universe of around 500,000 individuals ever holding political office, and we exploit information available in both datasets on a substring of each individual's last name and municipality of birth in order to identify family ties. Using a diff-in-diff analysis that follows individuals as their family members enter and leave office, and correcting for the measurement error induced by our fuzzy matching method, we estimate that the monetary return to having a politician in the family is around 3.5 percent worth of private sector earnings and that each politician is able to extract rents for his family worth between one fourth and one full private sector job per year. The effect of nepotism is long lasting, extending well beyond the period in office. Consistent with the view that this is a technology of rent appropriation on the part of politicians, the effect increases with politicians' clout and with the resources available in the administration where they serve.

Keywords: Family connections, Nepotism, Politics, Rent appropriation

JEL Classification: D72, D73, H72, J24, J30, M51

Suggested Citation

Gagliarducci, Stefano and Manacorda, Marco, Politics in the Family Nepotism and the Hiring Decisions of Italian Firms (May 2016). CEPR Discussion Paper No. DP11277, Available at SSRN: https://ssrn.com/abstract=2780385

Stefano Gagliarducci (Contact Author)

University of Rome, Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy

HOME PAGE: http://https://sites.google.com/site/stefanogagliarducci/

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Marco Manacorda

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Queen Mary, University of London

Mile End Road
London, London E1 4NS
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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