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The Old Boy Network: The Impact of Professional Networks on Remuneration in Top Executive Jobs

SAFE Working Paper No. 123

60 Pages Posted: 19 Jan 2016  

Marie Lalanne

Goethe University Frankfurt - Research Center SAFE

Paul Seabright

University of Toulouse I - Industrial Economic Institute (IDEI); Centre for Economic Policy Research (CEPR)

Date Written: January 18, 2016

Abstract

We investigate the impact of social networks on earnings using a dataset of over 20,000 senior executives of European and US firms. The size of an individual's network of influential former colleagues has a large positive association with current remuneration. An individual at the 75th percentile in the distribution of connections could expect to have a salary nearly 20 per cent higher than an otherwise identical individual at the median. We use a placebo technique to show that our estimates reflect the causal impact of connections and not merely unobserved individual characteristics. Networks are more weakly associated with women's remuneration than with men's. This mainly reflects an interaction between unobserved individual characteristics and firm recruitment policies. The kinds of firm that best identify and advance talented women are less likely to give them access to influential networks than are firms that do the same for the most talented men.

Keywords: professional networks, gender wage gap, executive compensation, placebo technique

JEL Classification: A14, J16, J31, J33

Suggested Citation

Lalanne, Marie and Seabright, Paul, The Old Boy Network: The Impact of Professional Networks on Remuneration in Top Executive Jobs (January 18, 2016). SAFE Working Paper No. 123. Available at SSRN: https://ssrn.com/abstract=2717988 or http://dx.doi.org/10.2139/ssrn.2717988

Marie Lalanne (Contact Author)

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Paul Seabright

University of Toulouse I - Industrial Economic Institute (IDEI) ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France
+33 5 61 12 86 17 (Phone)
+33 5 61 12 86 37 (Fax)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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