Thread by @glad_1723

To get a good job or promotion, it helps to have friends in high positions, right?

This might not be the case for high politburo positions in China, as the forthcoming AER by @RFisman, Shi, Wang & Wu shows.

#econfriday

Setting: The Central Politburo is the highest body of China’s government, and its jobs are highly popular. Ergo, the decision process is highly competitive and require more than a top performance in education and prior jobs. So, do friends in high positions help you get the job?

Results: The authors use a large dataset to investigate whether applicants whose peers from their hometown or from college are part of the decision committee have higher chances to get the job. And the surprising answer is NO – peers make you LESS likely to be selected!

Data: To look into candidates’ backgrounds and peers, the authors make use of a huge and very detailed dataset. The “Political Elites of the Communist Part of China” contains information on most high public officials. All missing information they could gather from other sources.

Identification: To make sure no other things drive their results, the authors use a high amount of Fixed Effects. They hold hometown, college and workplace constant and hence only compare candidates with similar prerequisites who may or may not have a peer at the Politburo.

Where does the effect come from? The authors apply a detailed heterogeneity analysis and find a couple of explanations: For example, the “connections penalty” is higher among junior Politburo members, suggesting they want to maintain their high social status within their network.

In sum: exciting paper with cool data & a surprising result! If you`re interested in social networks, want to think about the surprising “connections penalty” & wonder whether this effect may be specific to China–we can highly recommend this weekend read!

bit.ly/2T7WTsJ