Events

Mr. Toshiaki Komatsu
Ph.D. Candidate in Economics
The University of Chicago

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 rela-
tionships with a matched employer-employee dataset, we document the prevalence and
characteristics of worker reallocation along the supply chain. Belgian workers are con-
nected 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 find-
ings 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 em-
ployers 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.