Quarterly Journal of Political Science > Vol 14 > Issue 4

Princelings in the Private Sector: The Value of Nepotism

David Szakonyi, George Washington University, USA, dszakonyi@gwu.edu
 
Suggested Citation
David Szakonyi (2019), "Princelings in the Private Sector: The Value of Nepotism", Quarterly Journal of Political Science: Vol. 14: No. 4, pp 349-381. http://dx.doi.org/10.1561/100.00018087

Published: 10 Oct 2019
© 2019 D. Szakonyi
 
Subjects
Bureaucracy: Appointments,  Bureaucracy: Public administration,  Political corruption,  Political economy
 
Keywords
CorruptionRussiapolitical economyautocracynepotism
 

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In this article:
Family Connections at the Federal Level in Russia
Building Family Links
Research Design and Identification Strategy
Empirical Analysis
Private Firm Mechanisms
Conclusion
References

Abstract

What is the value of a family tie? Nepotism is a common feature of democratic and non-democratic systems, but our understanding of how and why family members of government officials receive preferential treatment is limited. Using administrative data on the universe of Moscow citizens to identify family links, I adopt a difference-in-differences design to estimate the labor market returns of having a relative enter the Russian government from 1999 to 2004. Employment rates and annual wages increase for individuals related to federal bureaucrats. Surprisingly, these relatives just as often find work in the private sector, over which the government has no formal control. To explain this, I demonstrate that companies strategically hire officials' family members in order to receive state contracts and preferential regulatory treatment. Governments may be willing to overlook this type of favoritism in the allocation of jobs, since even if they do not benefit directly, nepotism creates a class of individuals invested in the current power structure.

DOI:10.1561/100.00018087