Social norms or mutual insurance arrangements may be a key determinant of the propensity to hire family into businesses, and maybe a key contributor to less productive worker-firm matches. Literature in anthropology suggests that firms hire relatives not as the optimal response to contracting frictions, but rather as a result of mutual insurance arrangements (Kennedy1988, Akyeampong et al.2014). In these accounts, firms are often reluctant to hire relatives, who are often worse employees than non-relatives due to negative selection (less able relatives request jobs) and greater moral hazard (firm owners find it difficult to levy sanctions on their relatives).
This study offers business owners a subsidy to hire an additional employee and to use a public-private design to see how the valuation of relative employee candidates changes when employers know this will be publicly observed. The experiment will proceed in three visits between enumerators and local business owners.
Results and Policy Lessons
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