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.



Conference Presentation


Herbert Dawid has given a talk on 'Agent-based Macroeconomics' at a conference on '10 years after the World Financial Crisis'   in Hamburg from November 16-18.

Research Presentation


Herbert Dawid has given a talk about 'Product Innovation With Partial Capacity Rollover' in a research symposium at the ceremony awarding the Research Award 2018 of the Austrian Science Association to Gustav Feichtinger (Programm)

Seminar Presentation in Mainz


Herbert Dawid will give a talk on 'Manager Remuneration, Share Buybacks and Firm Performance' on October 29, 2018 in the Faculty Seminar Series of the Gutenberg School of Management and Economics at the University of Mainz.

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.


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