Learning by Hiring, Network Centrality and Within-Firm Wage Dispersion

In this paper, we highlight knowledge as specific channel through which labour mobility affects conditional within-firm wage dispersion. We present a model in which workers acquire knowledge on the job and firms pursue a policy of learning-by-hiring. The latter generates workers flows that connect directly and indirectly firms in a network. The model predicts that firms central to the network, those with the most heterogeneous workforce in terms of past employers, have the highest wage dispersion. Using 1990-2001 Veneto (a region of Italy) matched employer-employee data, we map workers flows between firms and build the network formed by all the firms. For each firm, we assess its network centrality. In our data conditional within-firm wage dispersion turns out to be increasing in network centrality, confirming the prediction of the model