DP8632 Professional Network and Career Coevolution

Author(s): Nicoletta Berardi, Paul Seabright
Publication Date: November 2011
Keyword(s): executive compensation, labor mobility, social capital, social networks
JEL(s): D85, J31, J62, M12
Programme Areas: Labour Economics, Public Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8632

This paper examines how networks of professional contacts contribute to the development of the careers of executives of European and US companies. We build a dynamic model of career progression in which career moves both depend upon existing networks and contribute to the development of future networks. We test the theory on an original dataset of nearly 7000 executives in over 3000 firms. We find evidence that professional networks are relevant both because valuable for the employer and because they facilitate job mobility. Our estimates of the elasticity of executives’ salaries with respect to the size of their professional networks vary between around 5% and around 20% depending on the specification, with a point estimate under our preferred specification of 6.7%.