Research

Job Market Paper

Job Ladder over Production Networks with Emmanuel Dhyne
- Abstract: This paper studies the roles of firm-to-firm networks in explaining workers’ movements between employers. Merging Belgian data on the universe of firm-to-firm sales relationships with a matched employer-employee dataset, we document the prevalence and characteristics of worker reallocation along the supply chain. Belgian workers are connected through the sparse networks of their employers, and more than 40 percent of job-to-job movers find their next employers among the buyers and suppliers of their current employers. The movers within production networks, on average, do not receive immediate gains in their earnings relative to other movers, and these movements are not explained by a random matching of workers and firms alone. Motivated by these findings that workers are disproportionately more likely to find job opportunities within production networks, we develop and estimate an equilibrium model of firm-to-firm trade and on-the-job search. We estimate a higher job-finding rate along production networks and find that workers direct around 30 percent of their job search toward buyers and suppliers, implying a considerable overlap between the set of potential employers in the labor market and the firm-to-firm linkages in the product market. Our results suggest that the network search channel reduces the diversification of workers’ outside options against productivity shocks to production networks.

Foreign Demand Shocks to Production Networks: Firm Responses and Worker Impacts with Emmanuel Dhyne, Ayumu Ken Kikkawa, Magne Mogstad, and Felix Tintelnot, July 2022
- Revision requested at American Economic Review
- Abstract: We quantify and explain the firm responses and worker impacts of foreign demand shocks to domestic production networks. To capture that firms can be indirectly exposed to such shocks by buying from or selling to domestic firms that import or export, we use Belgian data with information on both domestic firm-to-firm sales and foreign trade transactions. Our estimates of firm responses suggest that Belgian firms pass on a large share of a foreign demand shock to their domestic suppliers, face upward-sloping labor supply curves, and have sizable fixed overhead costs in labor. Motivated and guided by these findings, we develop and estimate an equilibrium model that allows us to study how idiosyncratic and aggregate changes in foreign demand propagate through a small open economy and affect firms and workers. Our results suggest that the way the labor market is typically modeled in existing research on foreign demand shocks—with no fixed costs and perfectly elastic labor supply—would grossly understate the decline in real wages due to an increase in foreign tariffs.

Dual Labor Market and Domestic Outsourcing: Evidence from Belgium with Emmanuel Dhyne
Age Sorting in the Labor Market with Hyejin Park