Essays on coworker networks and employment dynamics

This thesis consists of three distinct but related papers on the implications of information transmission between coworkers on labour market outcomes and employment dynamics. I use administrative data from Germany (SIEED) as the main source of data in all three papers. The first paper empirically investigates the relationship between coworker occupational homophily —defined as the share of direct coworkers with the same occupation—and the probability of changing occupation among workers who switch jobs. The results suggest a strong negative effect of occupational homophily on the probability of changing occupation. This effect is more pronounced for high-skilled service and production jobs, and when coworkers share other characteristics such as gender and age group. The second paper examines how the size of coworker networks influences job search efficiency and its implications for worker mobility and wage dispersion. I develop an equilibrium on-the-job search model with two-sided heterogeneity, wage bargaining, and endogenous coworker networks, where workers form connections with coworkers when they join a firm and retain them during periods of unemployment. I estimate the model using indirect inference, and I find a large effect of networks on job-to-job mobility, but a relatively modest effect on wage dispersion. The third paper investigates the role of the occupational composition of coworker networks in occupational choice and its implications on mobility, wages, and occupational allocation. I propose a model that incorporates search through coworker networks into an on-the-job search model with heterogeneous workers, firms, and occupations. The data suggest that the probability of choosing an occupation following a transition increases with the share of coworkers switching to that occupation. I estimate the model using indirect inference. A counterfactual analysis indicates that coworker networks account for a moderate part in wage dispersion, and a significant part in mobility and the allocation of workers into high skilled occupations.