Seminar in Economics with Oskar Nordström Skans

Oskar Nordström Skans, Uppsala University
When Connections Become Hires: Firm-Level Responses to Supply Shocks within their Workers' Social Networks

 

Abstract

We provide a first analysis of how firms react to labor supply shocks within the social networks of incumbent employees. We use Swedish economy-wide register data to characterize firms’ ties to other workers through existing employees’ family ties (parents, children, siblings and spouses) and connections to previous coworkers. We show that firms recruit more connected workers in years when socially connected workers lose their jobs. This response is large enough to increase overall hiring and job creation rates. Production per worker remains unaffected, suggesting that privileged access to displaced workers allows connected firms to grow with retained productive efficiency.