The Old Boys' Club : Schmoozing and the Gender Gap

Offices are social places. Employees and managers take coffee breaks together, go to lunch, hang out over drinks, and talk about family and hobbies. In this study, we show that employees’ social interactions with their managers are advantageous for their careers and that this phenomenon contributes to the gender pay gap. We use administrative and survey data from a large financial institution. We estimate the impact of social interactions on career progression using quasi-random variation induced by the rotation of managers, along with the smoking status of managers and employees. When male employees who smoke transition to male managers who smoke, they take breaks with their managers more often and are subsequently promoted at higher rates. The smoker-to-smoker advantage is not accompanied by any differences in effort or performance. Moreover, we find that the male-to-male advantage is also only present among employees who work in close proximity to their managers, limiting the mechanism to channels requiring face-to-face interaction. The male-to-male advantage explains a third of the gender gap in promotions at this firm