"Who you know" earnings effects of formal and informal social network resources under late state socialism in Hungary, 1986-87

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, 1986-87. 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.