Essays on Coworkers and Labor Mobility

Abstract

Social networks influence labor market outcomes. This dissertation investigates how the sectoral composition of an individual's current and past coworkers affects their job-switching decisions. The first chapter establishes the empirical relationship between a worker's current coworkers' past sectors of employment and their decision to move into those sectors. To identify causal effects, I employ multiple strategies, including distinguishing between current-year and non-current-year coworkers, controlling for time-varying shocks specific to industry pairs, and using unexpected death or retirement events to isolate idiosyncratic changes in coworker networks. Using German administrative matched employer-employee longitudinal data, I find a positive causal relationship between the proportion of coworkers from a sector and both the propensity of transitioning to that sector and the sensitivity to sectoral wage changes. \par The second chapter quantifies the coworker mechanism's contribution to employment and reallocation. Inspired by the empirical relationship documented in the first chapter, I develop and estimate a multi-sector, multi-firm general equilibrium model where perceived wages and adjustment costs for sector transitions depend on coworker shares. My results show that the welfare effect of COVID-induced productivity shocks is higher when considering coworker networks compared to assuming no influence from coworkers. Maintaining worker-employer ties to reduce competition in positively shocked sectors can further increase welfare. The third chapter provides survey evidence on the underlying mechanisms through which coworkers influence job choices. I investigate how coworkers shape job mobility decisions by altering perceived outside options. Leveraging novel survey data administered to a representative sample of wage and salaried workers in the US, I identify two key channels through which current and former coworkers influence workers' decisions to switch jobs or industries. First, having more current coworkers with prior experience in an industry improves the accuracy of wage beliefs for that industry, as supported by an analysis of perceived wages and coworker composition. Second, having more past coworkers currently employed at a firm increases the perceived likelihood of receiving a job offer from that firm, as evidenced by a survey experiment eliciting job offer probabilities for hypothetical jobs. I explore the welfare implications of these results in a job choice model that incorporates these coworker effects, departing from traditional models that assume perfect information about wages and job-offer probabilities.