Social Connections and Incentives in the Workplace: Evidence from Personnel Data by Oriana Bandiera, Iwan Barankay, and Imran Rasul Comments by Thomas Zwick Centre for European Economic Research (ZEW) Mannheim 3rd Conference on Evaluation Research 27/28 October 2006, Mannheim

2 Impact of social connections on manager and employee effort Does this impact change if managers get incentive wages? Which implications do social connections have for enterprise productivity Clear causal effect Motivation

3 Results Managerial decisions are shaped by social connections with their subordinates and their monetary incentives Favoritism may be suboptimal for firm productivity Higher incentives for managers decrease favoritism

4 Impressive example for insider econometrics Very well written, especially careful in the derivation of the theoretical hypotheses and test of rival empirical explanations Use of a perfect natural experiment by estimating difference in differences Comments

5 Generality Central covariates (share of socially connected workers) are possibly jointly affected on the level of the group and not individual – cluster on group level Does change from fixed wages to performance pay increase average productivity? Negative impact of arrival cohort on productivity (continuous variable) after performance bonus for managers (Table A3) Is there an effect of social connections between workers?