Promotion Through Connections: Favors or Information?

Connections appear to be helpful in many contexts such as obtaining a job, a promotion, a grant, a loan or publishing a paper. This may be due either to favoritism or to information conveyed by connections. Attempts at identifying both effects have relied on measures of true quality, generally built from data collected long after promotion. Building on earlier work on discrimination, we propose a new method to identify favors and information from data collected at time of promotion. Under natural assumptions, we show that promotion decisions for connected candidates look more random to the econometrician, due to the information channel. We derive new identification results and show how to use heteroscedastic probit models to estimate the strength of the two effects. We apply our method to the data on academic promotions in Spain studied in Zinovyeva and Bagues (2015). We find evidence that connections both convey information and attract favors. Our results are consistent with evidence obtained from data collected five years after promotion.

A light lunch will be available at 12.00 pm. The presentation starts at 12:15 pm.