Beyond the water cooler: How firm networks influence individual actions and careers

• In Event: 3544 - Labor Market

Abstract

Access to information is essential for employees in the labor market, as it is relevant for both a worker’s productivity and her chances to change to other jobs. However, little is known about the structures that grant access to or restrict access to relevant information. We argue that employees who change to other jobs create a network of interconnected firms. The firm’s network position should then govern what information is accessible for workers within the firm. We use German administrative data on social security contributions (IEB) with a sample of all employees from the manufacturing industry in Germany’s largest labor market region Munich from the period 1998 to 2014 to identify changes of employees (ties) between firms (nodes). We show that the position in the resulting network structure (in- and outdegrees and betweenness centrality) has significant effects on an employee’s wages. Using fixed-effects and first-difference models, we show that a change into a central position in the firm network is associated with an increase in wages, especially when assuming that changes to other firms create longer lasting information channels. While increases in indegree seem to further increase wages for employees within the firm, increases in outdegree impose negative effects, suggesting that negative effects of employees leaving the firm outweigh positive effects through information flows.

Authors

• Sebastian Werner Bähr, Insitute for Employment Research (IAB)

• Malte Riechelt, NYU Abu Dhabi & Institute for Employment Research (IAB)