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.





New Journal Publication


Rebien M., Stops M., Zaharieva A. (2020) "Formal Search and Referrals from a Firm's Perspective", International Economic Review


New Journal Publication


Harting, P. and Radi, D. (2020), "Residential Segregation: The Role of Inequality and Housing Subsidies", Journal of Economic Behavior and Organization

New Journal Publication


Dawid H, Pellegrino G, Vivarelli M (2020), "The role of demand in fostering product vs process innovation: a model and an empirical test", Journal of Evolutionary Economics

New Working Paper


Members of the ETACE group have analyzed economic and epidemic effects of different policies aiming at the containment of the COVID-19 pandemic. They employ a calibrated agent-based simulation model for their analysis.




The EU-funded project GROWINPRO, in which several ETACE members are participating, has published a video on the "Green New Deal".

New Leibniz Research Campus


Anna Zaharieva and Herbert Dawid are among researchers from Bielefeld University and the DIW Berlin, who will study economic, political and social aspects of regional heterogenity within the newly established Leibniz Research Campus "SOEP RegioHub". In their work Zaharieva and Dawid will combine the empirical analysis, mainly relying on SOEP data, with dynamic modelling appraoches. Anna Zahariava is also Co-speaker of the Campus which will receive funding from the Leibniz Association till 2024.

New Journal Publications:


Dawid H, Hellmann T (2020), "R&D Investments Under Endogenous Cluster Formation, Journal of Economic Behavior and Organization", 174, 253-283.



Dawid H, Kopel M, Kort PM (2020), "Product innovation with partial capacity rollover", Central European Journal of Operations Research, 28(2), 479-496



Exside-ITN International Conference Berlin


ETACE members are involved in the organization of the International Conference on 'Expectations and Social Influence Dynamics in Economics' which will be carried out in the framework of the Marie Sklodowska Curie Innovative Training Network ExSIDE  in Berlin in September.

See: http://exside-itn.eu/exside-conference/

Submissions are very welcome, the submission deadline is March 31.


Session at ASSA Conference


Herbert Dawid organized a session on 'Industry Dynamics and Optimal Firm Behavior' at the Allied Social Science Association (ASSA) meeting from January 3-5, 2020 in San Diego.

Appointment as Associate Editor


Philipp Harting has been appointed as Associate Editor of the International Journal of Microsimulations.

Invited Talk


On Oct. 30 Herbert Dawid gives an invited talk about 'Policy Analysis Using the Eurace@Unibi Model' at the Workshop 'Agent-based Economics' at the University of Graz.

New Working Paper


Hötte, K. (2019) Skill Transferability and the Stability of Transition Pathways - A Learning-Based Explanation for Patterns of Diffusion, Bielefeld Working Papers 09-2019

New Working Paper


Hötte, K. (2019) Eurace@unibi-eco: A model of technology transitions - v1.1 Model documentation, Bielefeld Working Papers 08-2019

Invited Talk


Herbert Dawid gives an invited talk on 'Efficiency Gains of Social Influence in a Minimum Effort Game' at the Workshop on Computational and Experimental Economics in Barcelona on June 11.

New Journal Article Accepted


Bigerna, S., Hagspiel, V., Kort, P., Wen, X. (2019) Green Electricity Investments: Environmental Target and the Optimal Subsidy, European Journal of Operational Research


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