I have been awarded an ERC Advanced Grant in 2017 to conduct research on firms and their networks.
There is mounting evidence that firms are becoming more fragmented; production is less often made “in-house”. Firms buy inputs from abroad. Tasks are often split in parts. Some are off-shored, others are subcontracted. Hence, firms also buy services from other, local or international, firms. They also supply inputs to other firms. Technical change, the internet, and globalization, all facilitate the division of labor between firms in the global economy. In order to study firms’ structure and behavior in this changing world, one must examine the relations these firms have built with their direct environment and how such relations shape firms’ answers to shocks. The project aims to construct a networks view of the firm, addressing empirical, theoretical, and econometric questions.
The research agenda consists of four closely related Work Packages (WP). The first two are empirical and focus on how social networks (WP1, on Sweden) and business networks (WP2, on French exporters and their international clients) help firms to be resilient when facing shocks. Fragmented and specialized firms create a business network of customers and suppliers to secure provision of different tasks. Moreover, firms may rely on their employees’ social networks (family ties, boardroom relations, …) to find new suppliers of goods and services, hire workers or look for administrative or financial support during downturns. Firms' resilience is essentially measured using administrative data on its economic outcomes such as production or value-added and its employees' labor market outcomes such as employment, wages, or the structure of their occupations. The third, WP3, adds an optimizing dimension together with a system perspective to the questions raised in WP2. It examines a network theory of production and firm-to-firm trade within a General Equilibrium framework where buyers meet sellers to fulfill production tasks. The model generates both micro- and macro-economic predictions. Finally, inspired by problems faced in WP1 and WP2, WP4 provides econometric tools to understand many-to-one matches (typically n workers and their employing firm or an exporter and its n international buyers) in the presence of networks that connect workers or firms. These tools will be applied to questions raised in WP1 and WP2, using the same data sources.
The complete research proposal can be found here.
WP1: Social Networks (Swedish data)
"Social Connections and the Sorting of Workers to Firms" (Sep. 2019), with O. Skans, L. Hensvik and M. Eliason. Previous version (April 2019) also as CEPR Discussion Paper 13672.
WP2: French Exporters and their Business Networks
Given the granularity of international trade networks, the present analysis aims to provide empirical evidence on how idiosyncratic, firm-level shocks that affect one side of the trading relation are transmitted to sellers in France, for whom we can measure outcomes using administrative, linked employer-employee data. In particular, we hope to answer the following questions: What happens to French exporters when a (large) buyer disappears? How does the firm redeploy its sales in the face of sudden micro-economic demand shocks? How are workers affected in their jobs or wages? How does the structure of occupations and tasks across and within firms change as a result of global trade?
Advancement of the project:
- We use an experimental procedure to identify buyer deaths. We will also try alternative strategies, in particular by estimating survival probabilities of foreign buyers in the sample.
- We estimate the effects of buyer deaths on French exporters through an event study design. We plan to implement propensity-score matching as well.
WP3: Theory: A General Equilibrium Model of Firm-to-Firm Trade
Pure competition setup:
Bertrand competition (work in progress) :
Extension of purely competitive framework (see above) to a setting with Bertrand competition and rent-sharing. The goal is to understand and make predictions on wage heterogeneity between firms.
WP4: The Econometrics of Many-to-One Matches
to be added
Research is carried out jointly with researchers at CREST, Uppsala University, Yale University and Penn State University.
Current and previous research assistants: Lorenzo Kaaks, Sophie Nottmeyer, Etienne Guigue, Maxime Cugnon
Firms and Markets Seminar at CREST