Professional Networks, Firm Hierarchies and Wage Inequality

The Role of Professional Networks and Firm Hierarchies for Individual Careers and Wage Inequality

Funded by the German Science Foundation (DFG) from 2017-2020.


Principal Investigators

Herbert Dawid

Anna Zaharieva


Short Description:

The purpose of this project is to investigate, from a theoretical perspective, the role of professional networks and firm hierarchies for individual wage dynamics, income inequality and intergenerational mobility. Existing empirical literature reports growing wage inequality in developed economies, which largely takes the form of a widening wage gap between high and low skill workers (wage polarization). In this project we aim to investigate whether an increase in importance of social networks on the labor market can contribute to a rise in wage inequality and an increase in the positive correlation of wage income between generations. The innovative aspect of our project relative to the existing literature is a unified treatment of the evolution of professional networks and career paths of workers in hierarchical firms. In the first stage of the project we will develop a search and matching model of the labour market with heterogeneous skill groups, experience accumulation and hierarchical firms. In the second stage the evolution of professional networks will be endogenized capturing the fact that social ties are often established between coworkers on the same hierarchical level. Taking into account that social ties play a role in career development, the emerging homophily in the social network in this framework may intensify the endogenous sorting of high (low) skill workers to higher (lower) hierarchical positions within firms. A crucial goal of the project is to gain a sound understanding of the effect of these mechanisms on individual career prospects and wage inequality. Finally, it will be explored how the intergenerational correlation of wages is amplified if children have access to the professional network of their parents. Whereas we expect to provide characterizations of the equilibrium with endogenous promotion times in hierarchical firms by analytical means, we will rely on (agent-based) simulations of the models with endogenous networks in the second stage of the project.



Invited Lecture


Herbert Dawid will give an invited lecture on 'Manager Remuneration, Share Buybacks and Firm Performance' at the CeNDEF@20 Workshop at the University of Amsterdam on October 18, 2018. Also Sander van der Hoog will give a presentation on 'Assessing Macroprudential Stabilization Policies with the Eurace 2.0 Model'.

Master Thesis Award


A master graduate in Quantitative Economics -- Le Quynh Nhu Nguyen--  is awarded a Prize for the best Master thesis with practical relevance by the Erich-Gutenberg Gesellschaft (Herford). The Master thesis was supervised by J.-Prof. Anna Zaharieva and Prof. Herbert Dawid.

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New Journal Article Accepted


Huberts N, Dawid H, Kort PM, Huisman K. Entry Deterrence by Timing Rather than Overinvestment in a Strategic Real Options Framework. European Journal of Operational Research. Accepted.

New Working Paper


Neugart, M. und Zaharieva, A. (2018) Social Networks, Promotions, and the Glass-Ceiling-Effect Center for Mathematical Economics Working Paper No. 601

Invited Talk


Philipp Harting gave an invited talk on 'Manager Remuneration, Share Buybacks and Firm Performance' at the 10th Workshop on Dynamic Models in Economics and Finance MDEF  (hhttp://www.mdef.it/meetings/mdef-2018/) on September 6, 2018 in Urbino, Italy.

Seminar Talk


Philipp Harting gave a seminar talk on 'Manager Remuneration, Share Buybacks and Firm Performance' at the University of Pisa on September 11, 2018.

New Journal Article Accepted


Dawid H., Harting P,. and van der Hoog,  S. (2018), Manager Remuneration, Share Buybacks and Firm Performance,
Industrial and Corporate Change

New EU Project


The European Union has selected the project GROWINPRO ('Growth Welfare Innovation Productivity')for funding under the Horizon 2020 Call 'TRANSFORMATIONS-14-2018 — Supply and demand-oriented economic policies to boost robust growth in Europe – Addressing the social and economic challenges in Europe'. The ETACE members Herbert Dawid, Philipp Harting and Anna Zaharieva are members of the project consortium. The project will run for 3 years and receive funding of about 3 Mio Euro, with 240.000 EURO going to Bielefeld University.

New Handbook on Computational Economics


The 4th volume of the Handbook of Computational Economics with title 'Heterogeneous Agent Modeling' has just been published. It includes a survey on 'Agent-based Macroeconomics' co-authored by Herbert Dawid and many other surveys of the state of the art in different areas closely related to ETACE research.

BA 2025 Arbeitsmarktpolitik in Zeiten von Digitalisierung und Arbeitskräftemangel


A public lecture at the ZIF with a topic "BA 2025 Arbeitsmarktpolitik in Zeiten von Digitalisierung und Arbeitskräftemangel" will be given by Michael Köster from the German Federal Employment Agency (Bundesagentur für Arbeit) on the 4th of July (18:15). The talk will be in German, please, see the poster for more details.

Migration and Refugees from a Global Labour Market Perspective


A workshop at the ZIF with a title "Migration and Refugees from a Global Labour Market Perspective" will be held on the 5-6th of July. It is an interdisciplinary workshop, but there are several presentations by economists on the program.

CEF 2018


ETACE members actively participated and presented papers at the 24th International Conference on Computing in Economics and Finance (CEF 2018) in Milano http://comp-econ.org/CEF_2018/.


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