{"title":"Earnings Inequality in Production Networks","authors":"Federico Huneeus, Kory Kroft, K. Lim","doi":"10.3386/W28424","DOIUrl":null,"url":null,"abstract":"This paper investigates the importance of firm-to-firm production network linkages for earnings inequality. We develop a quantitative model in which heterogeneous firms hire workers of different abilities in an imperfectly competitive labor market and source intermediates from heterogeneous suppliers in a production network. The model delivers an earnings equation with a firm-specific wage premium that depends endogenously on both firm productivities and firm-to-firm linkages in the production network. We establish identification of the model parameters and estimate them using linked employer-employee and firm-to-firm transactions data from Chile. Counterfactual simulations using our estimated model show that heterogeneity in network linkages explains 21% of log earnings variance, while passthrough of productivity shocks via network linkages explains between 20-25% of earnings volatility. We also examine the effects of a minimum wage policy and find strong spillover effects to worker earnings above the wage floor, with substitution of materials for labor explaining around 40% of these effects. \n \nInstitutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.","PeriodicalId":448175,"journal":{"name":"Comparative Political Economy: Comparative Capitalism eJournal","volume":"10 6 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2021-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"9","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Comparative Political Economy: Comparative Capitalism eJournal","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.3386/W28424","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 9
Abstract
This paper investigates the importance of firm-to-firm production network linkages for earnings inequality. We develop a quantitative model in which heterogeneous firms hire workers of different abilities in an imperfectly competitive labor market and source intermediates from heterogeneous suppliers in a production network. The model delivers an earnings equation with a firm-specific wage premium that depends endogenously on both firm productivities and firm-to-firm linkages in the production network. We establish identification of the model parameters and estimate them using linked employer-employee and firm-to-firm transactions data from Chile. Counterfactual simulations using our estimated model show that heterogeneity in network linkages explains 21% of log earnings variance, while passthrough of productivity shocks via network linkages explains between 20-25% of earnings volatility. We also examine the effects of a minimum wage policy and find strong spillover effects to worker earnings above the wage floor, with substitution of materials for labor explaining around 40% of these effects.
Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.