Social networks and ethnic niches: An econometric analysis of the manufacturing sector in South Africa

Abstract

This paper analyses the link between social networks and ethnic occupational niches in the manufacturing sector in South Africa. To this end, it employs the methodology of Bertrand et al. to minimise the omitted variable bias induced by standard approaches investigating network effects and adopts Model's concentration index to define an ethnic niche. The results indicate that 25% of the sample is employed in ethnic niches in the manufacturing sector, but that niche employment varies markedly by language group. In addition, certain language groups tend to be clustered in advantageous niches where monthly income and skill levels are relatively high, while others occupy disadvantageous niches where monthly income and skill levels are relatively low. A number of different econometric specifications find strong evidence of social network effects. This highlights the role that these networks play in forming ethnic niches in the manufacturing sector in South Africa. © 2010 Economic Society of South Africa.