“Who you know” earnings effects of formal and informal social network resources under late state socialism in Hungary, 1986–1987

Abstract

Although social network assets have been widely studied as mechanisms for social achievement in the capitalist context, they remain largely unexamined under socialist-type systems. This paper addresses that weakness in the literature and tests the usefulness of social network resources in income attainment models in Hungary, 1986–1987. It suggests that the formal-informal distinction is a useful basic taxonomy of social network assets. Contrary to the received analytical framework of state socialist economies—which associates formality with the state sector and informality with the second economy—it treats formal and informal ties as present in both the state and non-state sectors. Regression models of social survey data show that social network resources are a positive contributor to income inequality in both the state and non-state sectors. Formal and informal network ties are shown to have independent and unequal returns, suggesting that they are different types of ties rather than poles in a spectrum.