The Network Origin of Slow Labor Reallocation

Leonard Bocquet
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Leonard Bocquet: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: What explains slow worker reallocation after trade or technological shocks? In this paper, I explore the idea that imperfect skill transferability constrains the reallocation of workers between occupations. I model these frictions as forming a network (the "occupational network"), whose nodes are occupations and whose edges represent the possible occupational transitions. I show that the structure of the occupational network matters for the speed of worker reallocation and I make two contributions. First, I find that this network is very sparse, hinting at large frictions to occupational mobility, and that there exists central bottleneck occupations which can block the reallocation process. Second, I extend the search and matching model of the labor market with an occupational network. I find that asymmetric shocks can generate transition dynamics which are two orders of magnitude slower than in the standard model. Moreover, I show that the intensity of network bottlenecks is a key determinant of slow worker reallocation dynamics after asymmetric shocks. In other words, central occupations have a granular effect on worker reallocation speed.

Date: 2022-06
New Economics Papers: this item is included in nep-dge and nep-net
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