Worker Mobility and Domestic Production Networks

IMF Working Papers, September 25, 2020

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Data on the universe of firm-to-firm transactions for the Dominican Republic, matched with employer-employee records, reveals that about 20 percent of workers who change firms move to a buyer or supplier of their original firm.
This share is a considerably larger share than would be implied by a random allocation of movers to firms.
Hiring workers from connected firms (buyers or suppliers) is associated with:
- higher worker wages,
- lower job separation rates,
- faster firm productivity growth,
- faster coworker wage growth.
Hiring workers from a supplier is followed by a rising share of purchases from that supplier.

Human capital appears easily transferable along the supply chain.
Human capital accumulated while working at a firm is complementary with the intermediate products/services produced by that firm.
Buyer-supplier linkages in domestic production networks therefore shape worker flows and generate mutual gains for workers and firms.

Subjects: Human capital, International trade, Labor, Labor mobility, Production, Productivity, Trade balance, Wages
Keywords: buyer-supplier relationship, connected firm, dummy variable, firm pair control, hiring firm, Human capital, Labor mobility, origin firm, production network, Productivity, Trade balance, Wages, worker flow, WP

Marvin Cardoza, Francesco Grigoli, and Nicola Pierri, September 25, 2020 — IMF Working Paper No. 2020/205.