Debojyoti Mazumdar (IIM, Indore)

The present article develops a search and matching framework to model political nepotism in the job market. The model argues that labor market friction generates incentives for the political leaders to provide nepotism under a democratic setup. Both the leaders optimally choose nepotism when the labor market friction is higher. It is shown that even for a relatively lesser labor market friction at least one leader would always choose nepotism. The results of the basic model remain robust in an extension where followers can pay a price and choose their allegiance, to any one of the political parties.