SMU SOE Seminar Series (March 11, 2026): Job Ladder and Dynamic Monopsony in Production Networks

TOPIC:

ABSTRACT

This paper examines how workers' outside options are concentrated within the supply chains of their employers.  Using Belgian data on firm-to-firm sales relationships merged with a matched employer-employee dataset, we find that workers are connected through the sparse networks of employers and frequently move to buyers or suppliers of their current employers.  Movers within these production networks climb up job ladders at a faster pace but with smaller immediate earnings gains than other movers.  Motivated by these findings, 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, which enables well-connected firms to suppress wages.  Accounting for the network search channel increases workers' exposure to correlated shocks in production networks.