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Toshiaki Komatsu, M.A.

National Bank of Belgium

Authors: Toshiaki Komatsu, 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.

Full Text: Job Ladder over Production Networks