Research

In this paper, we quantify the effects of nurses on health care delivery and patient health in the context of an unintended and policy-induced nurse shortage. Our empirical strategy takes advantage of a parental-leave program in Denmark, which offered any parent the opportunity to take up to one year's absence per child aged 0-8. Combining the policy variation with administrative employer-employee match data, we document substantial program take-up among nurses, who could not be replaced on net despite public education and immigration expansion efforts to mitigate the employment effects. We find that the parental leave program reduced hospital and nursing home nurse employment by 15 percent and 10 percent, respectively. Using detailed patient health records, we find detrimental effects on hospital-care delivery as indicated by a large increase in 30-day readmission rates among acute myocardial infarction patients. We find no evidence for an increase in hospital mortality. In nursing homes, we estimate a large increase in mortality.

This paper shows robust effects of trade shocks on within-firm wage inequality through changes in firm hierarchies. It uses two distinct research designs - one considering firm-level shocks to foreign demand and transportation costs, the other analyzing the Muslim boycott of Danish exports after the 2006 "Cartoon Crisis". Consistent with knowledge-based and incentive-based hierarchy models, trade shocks affect organizational choices through production scale. Adding a hierarchy layer increases inequality throughout the organization, particularly widening the 90-50 wage gap and pay differences between top and bottom layers. Delayering after the boycott leads to wage compression through wage cuts, demotions, and employee turnover.

This paper analyzes earnings inequality and earnings dynamics in Sweden over 1985--2016. The deep recession in the early 1990s marks a historic turning point with a massive increase in earnings inequality and earnings volatility, and the impact of the recession and the recovery from it lasted for decades. In the aftermath of the recession, we find steady growth in real earnings across the entire distribution for men and women and decreasing inequality over more than 20 years. Despite the positive trend, large gender differences in earnings dynamics persist. While earnings growth for men is more closely tied to the business cycle, women face much higher volatility overall. Earnings volatility is also substantially higher among foreign-born workers, reflecting weaker labor market attachment and high risk of large negative shocks for low-income immigrants. We document an important role of social benefits usage for the overall trends and for differences across sub-populations. Higher benefits enrollment, especially for women and immigrants, is associated with higher earnings volatility. As the generosity and usage of benefit programs declined over time, we find stronger earnings growth among low-income workers, consistent with higher self-sufficiency.

We study how firms respond to an unexpected demand shock, exploiting the 2006 boycott of Danish products after a Danish newspaper published Muhammad caricatures. On average, affected firms lose the majority of their exports to Muslim countries and experience a significant decrease in total sales, but are able to compensate for half of boycott-induced losses by increasing sales elsewhere. The average response, however, hides substantial heterogeneity by firms' capital structure. Low-leverage firms fully offset the effect of the boycott, as they enter new markets and introduce new products, facilitating this expansion by an increase in investment and borrowing. In contrast, high-leverage firms do not substantially expand in other markets, see a significant decline in sales, and reduce employment. Our results highlight the importance of operational and financial flexibility, consistent with declarations of practitioners.

(supersedes: "Internal Labor Markets and the Competition for Managerial Talent")

This paper studies how information frictions affect managerial hiring strategies across firms. Using Danish administrative data, I document that more productive firms hire more talented trainees and are more likely to promote managers internally. Motivated by these facts, I model talent competition among heterogeneous firms in the presence of asymmetric employer learning about managerial ability. Heterogeneous rents from asymmetric learning motivate market competition for young talent as “hiring for potential”. More precise initial signals increase talent-to-firm sorting but widen early-career pay dispersion. I provide evidence for this equity-efficiency tradeoff using the introduction of an elite business program. Its graduates enter highly productive firms at large premia and become managers there, while pay premia and placement quality decline for graduates from established programs. To generalize from this event study, I use the model to quantify the aggregate effects from removing information frictions and find productivity gains of 4–12% across industries.

This paper presents the first empirical evidence of interdependent values and strategic responses by market participants in a two-sided matching market. We consider the market for medical school programs in Denmark, which uses a centralized assignment mechanism. Leveraging unique administrative data and an information experiment, we show that students and rival programs hold payoff-relevant information that each program could use to admit students with higher persistence rates. Programs respond to these two sources of interdependent values, student self-selection and interdependent program values, by exhibiting "home bias" towards local applicants. We construct and estimate a novel equilibrium model reflecting this evidence, and find that fully sharing information could significantly increase student persistence and program payoffs, but enabling students to communicate first preferences would leave outcomes unchanged. An alternative model assuming independent private values contradicts the empirical evidence, highlighting the importance of accounting for interdependent values in understanding and designing matching markets.

This paper revisits the link between education-based marriage market sorting andincome inequality. Leveraging Danish administrative data, we develop novel marriage market types based on the starting wages and wage growth trajectories associated with educational programs: educational ambition types. We find a substantial increase in sorting by educational ambition over time, which explains more than 40% of increasing inequality since 1980. In contrast, sorting trends are flat with the commonly-used level of education or field of study. Hence, the mapping between education and marriage market types matters crucially for conclusions about the role of marital sorting in rising income inequality.

This paper analyzes the role of firms in workers’ wage dynamics. Using Swedish employer-employee data, we find substantial transmission of firm-specific productivity shocks to wages, primarily for permanent shocks and among high-skilled workers. Our approach accounts for endogenous participation and mobility decisions of workers in response to firm shocks. Differences in firms’ pay levels and pass-through of shocks drive a significant share of earnings variance, and this share increases over the workers’ life cycle. We find that firms account for about one-third of the cross-sectional wage variance by age 55 among high-skilled workers.

This paper studies how family and firm investments interact to explain gender gaps in career achievement. Using Danish administrative data, we first document novel evidence of this interaction through a "spousal effect" on firm-side career investments. This effect is accounted for by family labor supply choices that shape worker characteristics, which then influence firms’ training and promotion decisions. Our main theoretical contribution is to develop a quantitative life cycle model that captures these family-firm interactions through household formation, families' joint career and fertility choices, and firms’ managerial training and promotion decisions. We then use the estimated model to show that the interaction between families and firms in the joint equilibrium of labor and marriage markets is important when evaluating firm-side and family-side policy interventions. We find that gender-equal parental leave and a managerial quota can both improve gender equality, but leave implies costly skill depreciation, whereas the quota raises aggregate welfare, in part through adjustments in marital sorting towards families that invest in women.

Managers often report that labor constraints – defined as the inability to find workers – are a major obstacle to firms' growth. The phenomenon is puzzling, because economic theory offers a simple remedy: increase wages until the worker is found or hiring is no longer profitable. We explore why firms report labor constraints instead of pre-empting them by increasing wages using administrative data from Germany. We confirm that quasi-exogenous variation in labor constraints slows down firm growth. Wages play a role consistent with basic theory: firms that report constraints initially underpay their workers, increase wages later, and a quasi-exogenous increase in wages alleviates their problems. Why then do firms not increase wages earlier to avoid the problem to begin with? Unlike financial markets, labor markets do not have an easily observable price process. Firms set wages based on their beliefs, and when they underestimate market-clearing wages, labor constraints arise. Consistent with this mechanism, labor constraints increase after quasi-exogenous wage increases in other parts of the economy and are more prevalent in settings where firms are less well-informed.